Falling property prices lure back first-time buyers
MANY first-time buyers previously priced out of the property market are now considering a purchase, as house prices fall and mortgage rates are expected to come down.
Property prices have fallen by around 12 per cent in the past 12 months, according to the Halifax, and analysts are forecasting further falls of at least 15 per cent over the next year. But experts warn new buyers still risk high monthly repayments unless they have a hefty deposit.
“Now is the best time to buy property since the Nineties,” said Gary Murphy, spokesman for the Royal Institution of Chartered Surveyors and partner at Allsop, the auctioneers.
“Prices have come right down and we are approaching the bottom of the market, so if you can afford to, you should buy now, as it’s only a matter of time before we’ll see prices rising again.”
Melanie Bien from broker Savills Private Finance agreed it was now a buyer’s market. “Anyone buying now should be able to negotiate a sizeable discount on the asking price,” she said. “First-time buyers have the added advantage of not being in a chain.”
The latest figures from the National Association of Estate Agents (NAEA) showed the average percentage of first-time buyers on estate agents’ books was 9.5 per cent in September — an increase from 8.3 per cent the previous month.
“First-time buyers seem to be returning, and this is most likely due to the Government’s decision on stamp duty last month — when it lifted the statutory threshold from £125,000 to £175,000 for the next 12 months,” said Chris Brown, president of the NAEA.
“For those first-time buyers who have the correct finance in place, now is the perfect time to buy a home.”
Borrowers can, for example, get a two-year fixed-rate loan for 5.49 per cent with Market Harborough building society if they have a 25 per cent deposit but for those who only have a 10 per cent deposit, the leading rate is 6.14 per cent with Britannia building society.
HSBC and Nationwide have three-year fixes at 6.54 per cent and 6.59 per cent respectively for those with 10 per cent deposits. For those with a deposit of just 5 per cent, there is less choice, and the rates climb even higher; Scarborough building society, for example, has a two-year fix at 6.69 per cent.
“While there are some 95 per cent deals around, these are mainly restricted to local branch deals through building societies and are not universally available,” said Louise Cuming at Moneysupermarket.com.
“The Royal Bank of Scotland, for example, has a rate of 6.99 per cent at 95 per cent loan-to-value [if you only have a 5 per cent deposit] but you are tied into this until 2014.”
First-time buyers should take a careful look at the figures. “A borrower with a £150,000 interest-only deal would pay £686 a month if they had a 25 per cent deposit and took out a deal with Market Harborough but this would rise to £836 a month if they only had a 5 per cent deposit and took out the deal with Scarborough,” said Bien.
“However, if you are making a significant saving on the initial price of the property, you may be able to afford a rate of up to 7 per cent a month — which is not, historically, all that high.”
Cuming said: “The over-riding advice is to make sure the figures add up, so that you can afford both the upfront costs and the ongoing mortgage repayments.”
David Hollingworth from broker London & Country urged first-time buyers not to get obsessed with trying to pick the “right time to buy”.
“You have to look beyond house prices to whether you are buying the right place for the right reason,” he said.
