The pandemic is creating more obstacles for first time buyers

19th November 2020

By Anna Bibby

2020 has been a challenging year for many with a global pandemic, political uncertainty and an economy that is in a precarious situation. The aforementioned factors have made it more difficult to get on the housing ladder which in turn, has made the private rented sector more desirable.

Things were already tricky for first time buyers before the pandemic - rapidly rising house prices and an increasing cost of living (amongst other things) meant that taking that first step on the property ladder was virtually impossible for many people and naturally, this situation got a lot worse when the pandemic hit.

The country was put into a national lockdown which, as a result, put the economy and a lot of jobs in jeopardy, thanks to the majority of non-essential businesses being forced to close. The introduction of such drastic measures meant that government have had to come up with radical schemes to ensure that the economy will see a smoother and more timely recovery once the worst of the crisis passes. These measures include the furlough scheme which has already helped people retain their jobs while they were unable to work, and the mortgage holiday which has allowed people who are struggling financially to pause their mortgage payments.

While these schemes have been successful in saving jobs and homes, they have also had a negative impact on people’s chances of buying their first home. The latter in particular caused some cashflow and liquidity problems for the banks. That, combined with the huge backlog of applications that built up over the course of the lockdown, meant that they have had become more cautious when lending money back out again. When the property market re-opened back in May, a number of high street lenders decided to cut the number of 85% or higher LTV mortgage products, which is primarily used by first-time buyers who have smaller deposits. On top of this, they introduced stricter lending criteria which included clamping down on those that were furloughed from their job and had no set date to return to work. With less mortgage products available for first time buyers and many jobs hanging in the balance, a lot of people who may have been in a position to finally get on the housing ladder prior to the pandemic were now having their plans of buying a property thwarted.

On top of this, the UK property market saw an unexpected surge in activity when the market reopened. According to Rightmove’s latest house price index, house transactions have increased by a staggering 67% since last year and there was an 108% year-on-year increase in demand in September. Of course, this put an upward pressure on house prices; according Nationwide’s House Price Index for October, house prices in the UK saw a year-on-year increase of 5.8% - the highest rate recorded since January 2015. This meant that first-time buyer faced more competition when searching for their ideal property and on many occasions, were priced out of the market.

These recent trends just reiterate the importance of the Private Rented Sector in the current market. More people are having no option but to keep renting for the foreseeable future. On top of this, being on lockdown for months on end has encouraged people to look for new homes. According to a study carried out by ARLA Propertymark in September, letting agencies across the UK registered an average of 101 new tenants. On top of this, the study also found that 48% of agents witnessed landlords increased their rents.

Clearly the demand for rental properties is going nowhere, so now is a great time to invest in buy to let, despite the turbulent economy.

Are you looking to make your next investment? Get in touch today!

Did you find this article helpful?

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The pandemic is creating more obstacles for first time buyers

19 November 2020

2020 has been a challenging year for many with a global pandemic, political uncertainty and an economy that is in a precarious situation. The aforementioned factors have made it more difficult to get on the housing ladder which in turn, has made the private rented sector more desirable.

Things were already tricky for first time buyers before the pandemic - rapidly rising house prices and an increasing cost of living (amongst other things) meant that taking that first step on the property ladder was virtually impossible for many people and naturally, this situation got a lot worse when the pandemic hit.

The country was put into a national lockdown which, as a result, put the economy and a lot of jobs in jeopardy, thanks to the majority of non-essential businesses being forced to close. The introduction of such drastic measures meant that government have had to come up with radical schemes to ensure that the economy will see a smoother and more timely recovery once the worst of the crisis passes. These measures include the furlough scheme which has already helped people retain their jobs while they were unable to work, and the mortgage holiday which has allowed people who are struggling financially to pause their mortgage payments.

While these schemes have been successful in saving jobs and homes, they have also had a negative impact on people’s chances of buying their first home. The latter in particular caused some cashflow and liquidity problems for the banks. That, combined with the huge backlog of applications that built up over the course of the lockdown, meant that they have had become more cautious when lending money back out again. When the property market re-opened back in May, a number of high street lenders decided to cut the number of 85% or higher LTV mortgage products, which is primarily used by first-time buyers who have smaller deposits. On top of this, they introduced stricter lending criteria which included clamping down on those that were furloughed from their job and had no set date to return to work. With less mortgage products available for first time buyers and many jobs hanging in the balance, a lot of people who may have been in a position to finally get on the housing ladder prior to the pandemic were now having their plans of buying a property thwarted.

On top of this, the UK property market saw an unexpected surge in activity when the market reopened. According to Rightmove’s latest house price index, house transactions have increased by a staggering 67% since last year and there was an 108% year-on-year increase in demand in September. Of course, this put an upward pressure on house prices; according Nationwide’s House Price Index for October, house prices in the UK saw a year-on-year increase of 5.8% - the highest rate recorded since January 2015. This meant that first-time buyer faced more competition when searching for their ideal property and on many occasions, were priced out of the market.

These recent trends just reiterate the importance of the Private Rented Sector in the current market. More people are having no option but to keep renting for the foreseeable future. On top of this, being on lockdown for months on end has encouraged people to look for new homes. According to a study carried out by ARLA Propertymark in September, letting agencies across the UK registered an average of 101 new tenants. On top of this, the study also found that 48% of agents witnessed landlords increased their rents.

Clearly the demand for rental properties is going nowhere, so now is a great time to invest in buy to let, despite the turbulent economy.

Are you looking to make your next investment? Get in touch today!

Anna Bibby

Did you find this article helpful?


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