Majority of first-time buyers waiting for ‘house prices to drop after Brexit’
HUNDREDS of thousands of first-time buyers are delaying getting on the housing ladder until after Brexit, new research has found.
Over half of Brits who have saved enough money to put down a deposit on their first home have said they are delaying while we negotiate our exit from the European Union.
The study, carried out by OneFamily, found that of those people holding off, 65 per cent think buying before Brexit would be a bad financial decision.
As a result over 30 per cent of those who have saved enough to buy have decided to delay as they think they'll get more for their money after March 29.
Only one in five first-time buyers say they are happy to take the plunge pre-Brexit, either because they've found their dream home or think they have waited long enough.
It's not just those that are ready to buy a house that are hoping Brexit will cause a drop in property prices.
57 per cent of those still saving up said that high property prices are preventing them getting on the ladder but a market dip post-Brexit could leave them able to buy their first home now.
One in five said a drop of just five per cent in prices would mean they could afford a house and a further 30 per cent said they could buy if prices fell by ten per cent.
Nici Audhlam-Gardiner, managing director of Lifetime ISAs at OneFamily, said: "For many, market fluctuations as a result of Brexit could give them a golden opportunity to get on the housing ladder. Those who are planning to put off their purchase can use the additional time to make the most of the top up funding available from the government schemes."
What will happen to house prices after Brexit?
With the outcome of the Brexit vote still unclear, it is far from certain whether the property market will actually dip after March 29.
Russell Galley, managing director at Halifax expects prices to continue to rise in 2019. He says: "Despite current political upheaval, and on the basis that it is still most likely that the UK exits the EU with a form of withdrawal agreement and transition period, we expect annual house price growth nationally to be in the range of two per cent to four per cent by the end of 2019.
How to find the best mortgage deal
With hundreds of products on the market it can be hard to find the best mortgage to apply for. Here's our guide to choosing the right one.
Once you've got your deposit together, you can start looking for a mortgage deal.
Websites like Moneysupermarket and Moneyfacts let you compare costs and all the banks and building societies have offers available on their sites too.
If you're getting confused by all the deals available, it might be worth you speaking to a mortgage broker, who will help find the best offer for you.
A broker will typically cost between £300 and £400 but could help you save thousands over the course of your mortgage.
You'll also have to decide on if you want a fixed-deal where the interest you're charged is the same for the length of the deal or a variable mortgage, where the amount you pay can change depending on the Bank of England Base Rate.
Make sure not to be swayed by the headline rate and to take into account product fees, which can typically be around £1,000.
For more advice on getting a mortgage, read the Sun's step-by-step guide.
"This is slightly stronger than 2018, but still fairly subdued by modern comparison. However, the uncertainty around how Brexit plays out means there are risks to both sides of our forecast."
If Theresa May's deal goes through, we're likely to see more confidence in the market and for prices to rise, says Ruban Selvanayagam, Co-Founder at Property Solvers.
He explains: "Although there will be a degree of uncertainty and doubt, house buyers and sellers are more likely to be more confident in transacting.
"Interest rates would stay at the same level, or possibly increase (provided that economic indicators are positive) – but ongoing issues related to affordability will hamper any aggressive price growth, especially in London and the South East."
If Theresa May's deal fails and we end up with a "no deal Brexit", many commentators believe that property prices could fall. Although some argue that a drop in the value of the pound could lead to more foreign investment in the capital and South East pushing prices up.
Meanwhile, a delay to Brexit would likely lead to more uncertainty and the market would stay fairly flat.
Selvanayagam says: "Many may choose to sit on the sidelines to wait and see what happens – especially if their mortgage pay rates remain low and there’s no real motivation to sell.
How to increase your chances of getting a mortgage offer
HERE'S ten of the most common reasons your bank could say no and how to improve your chances.
- Poor credit rating - taking steps to improve your credit score will significantly increase your chances of being offered a mortgage.
- Not on the electoral roll - means companies can check your identity and will be more likely to make you an offer.
- Payday loans - plenty of lenders won't give mortgages to people who've taken out payday loans. Think twice before taking one out if you want to get on the property ladder soon,
If you've already taken one, make sure you pay it off in full and consider delaying a house purchase and saving more money. - Lack of earnings - consider taking a longer mortgage and save up the biggest deposit you can. Take advantage of government schemes like Help to Buy and the Lifetime Isa to maximise your savings.
- Small deposit - ideally you want as big a deposit as possible before you try for a mortgage, but if savings are tight - research carefully to find the best rates on high loan to value mortgages.
- Self-employed - try to wait until your business has been set up for more than three years, and can show tax records and business accounts
- New to the UK - few mortgage providers will lend to someone who has been in the UK for fewer than three years. If this is you and you desperately want to buy straight away, work with a mortgage broker who might be able to find you a lender
- The house is abover commercial property - buying a house above shops makes it really hard to get a mortgage - but you can get a deal. Be prepared to shop around and work with a broker.
- You're too old - high street lenders are used to offering mortgages that last 25 years years, so you might struggle to get one over 55. Some of the newer entrants are prepared to lend to older buyers so keep your options open.
- Errors on the application - make sure you fill in your forms carefully and don't guess any ofthe information needed it's a quick way to have your mortgage request denied!
For more tips on getting a mortgage offer, check out our guide.
"Others may extend or add value with a view to selling at a much later date.
"If a better deal can be negotiated as a result of the delay, this may restore better confidence buyers and sellers – which will fare well for the housing market over the medium term."
Given the uncertainty over what kind of Brexit we might get and what this could do to the housing market, first-time buyers may wish to take advantage of current low prices to make their move.
Simon Bath, CEO of When You Move explains: “It is undeniable that over the last few months, there has been a noticeable decline in property prices in the UK, especially in the more prosperous regions of England, such as the capital."
"As a result, first-time buyers are able to make their money go further. It is very much a buyers’ market. Whether this means securing a previously unattainable home, second steppers being able to afford their first family home or look to property investment opportunities."
What will happen to mortgage affordability post-Brexit?
Even if house prices do fall, this will only make things easier for first-time buyers if they can get a similar mortgage as they would have got pre-Brexit.
At the moment, mortgage rates are at historic lows meaning it's easier to get an affordable loan.
Bath says: “First-time buyers can also take advantage of the historically low mortgage rates. This is an indicates an excellent opportunity to buy before the UK’s formal exit from the European Union in March.
"There is potential for interest rates to increase post-Brexit if the final deal is not passed by Parliament."
But Selvanayagam argues that interest rates could be cut again in the event of a no deal Brexit.
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He says: "The adverse economic climate that would almost certainly arise as a result of a ‘no deal’ Brexit could potentially result in the Bank of England dropping interest rates back to 0.5 per cent, or even 0.25 per cent, to stimulate the economy – perhaps with some QE thrown in.
"Mortgage borrowers will therefore be able to continue to access decent product and those on tracker / variable rates will have little to complain about."
House prices dropped by £10,000 in just two months – the biggest fall since 2012 as buyers faced Brexit uncertainty.
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