First-Time Home Buyers, Here's What You Need To Know Right Now

This is how the budget might impact your dreams of getting on the housing ladder.
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Rishi Sunak unveiled his autumn budget this week and there was very little said about the housing market.

If you’re looking to buy your first home, you might be wondering what this means for you – especially as the average price of properties hit an all-time high of £338,462 in September.

Throughout the pandemic, demand for properties has outstripped supply, pushing up prices and excluding many first-time buyers. However, some market experts believe supply and demand could start to balance out this autumn.

The Office for Budget Responsibility, the official forecaster, has predicted the steep rise in property prices will slow, but won’t necessarily decline. In Savills’ latest forecast, prices are predicted to rise by 12.4% in some areas by 2025, suggesting prices will only get higher.

Jo Thornhill, mortgages expert at MoneySuperMarket, thinks the budget could have done far more to help first-time buyers.

“Arguably, there was an opportunity to tackle the housing crisis as despite a booming market, unaffordable homes continue to remain a problem for people across the nation, with rising bills and the cost of living continuing to increase – especially in London, ” she tells HuffPost UK.

“In turn, this has affected the housing market for first-time buyers, making inner London less and less attainable for those wanting to transition from renting to owning their first home.”

However, Jonathan Rolande, director of the National Association Of Property Buyers (NAPB), says his advice for first-time buyers is “not to panic, it’s settling down”. And he doesn’t believe it’s worth waiting until next year to start your property hunt.

“Christmas is a great time to look whilst other buyers are busy elsewhere, so there’ll be less competition and prices generally dip a little,” he tells HuffPost UK. “But you’ll still need to have funds and a solicitor lined up so you can move fast when the right property comes along.”

Sadly, no one has a crystal ball when it comes to the property market and there’s always a chance of right place, right time. But here are some things to consider if you’re ready to take the plunge.

Stamp duty is back to normal

The stamp duty holiday was introduced in July 2020, then extended until 30 June 2021. It was designed to kickstart the property market during the pandemic – and it worked.

Homebuyers flocked to purchase properties with a value of up to £500,000 with no stamp duty costs. As a result, they saved as much as £15,000 in stamp duty. When stamp duty resumed, it was still at a reduced rate until September, helping to maintain demand. This made house prices (and required deposits) skyrocket, which was no good for first-time buyers.

Now, stamp duty has resumed to pre-pandemic levels, and there was no suggestion of a future holiday in the autumn budget. This is good news for first-time buyers, says property expert Henry Pryor.

“The end of the stamp duty holiday will restore the advantage that first-time buyers had before it was introduced last year,” he tells HuffPost UK. “They don’t pay the buyer tax on the first £300,000 of a purchase, which helped them to compete with home movers who have to pay on anything over £125,000.”

Unsafe cladding may (finally!) be removed

Even before the pandemic took hold there was a lack of suitable properties on the market for first-time buyers. This was partly fuelled by the cladding scandal.

Following the Grenfell Tower fire in 2017, flats across the country – which typically appeal to first-time buyers – were identified as having potentially unsafe cladding. Many homeowners have been unable to sell such property while the issue remains unresolved.

As part of the budget, Sunak announced that large property developers will now face a new tax, and the subsequent funds will be used to pay for the removal of unsafe cladding. Rolande says this will eventually boost housing supply.

“Once the fears diminish and safety is assured, the backlog of sellers currently holding their property will start to clear and yes, more will come to the market,” he says.

But Henry points out the cladding scandal isn’t the only thing putting buyers off flats. “The leasehold scandal of rising ground rents and uncontrolled service charges has done almost as much harm to the reputation of new build homes across the country,” he explains.

If you’re interested in a leasehold property, it’s vital you check out the policies of the block first.

Mortgage rates are good right now

Taking on a mortgage can be intimidating, especially as a first-time buyer. But Thornhill points out that interest rates are currently low, saying “it’s good to take advantage of this if you can”. A number of banks are offering mortgages with interest rates of less than 1%. If you sign up to one, just keep in mind that this is likely to change later down the line.

Any other advice?

Pryor believes the the current market is more stable than it has been since the last general election two years ago, but says “it is not without its risks”.

“I still advise people to stay away from Help to Buy and to avoid Shared Ownership,” he says. (FYI, both can help you get on the market but have higher risks of negative equity if prices surge).

“These days when asked what is the best single piece of advice I can give a young person hoping to buy their first home I say ‘choose your parents carefully,’” he continues. “Half of all first-time buyers now have the help of the Bank of Mum & Dad. Without it many are simply unable to afford the current prices.”

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