The housing market has a dependency on first-time buyers, they are needed, or the entire system goes belly up. The system works that starter homes are purchased by first-time buyers, then in the usual process, the starter home is sold as the homeowner upgrades to a larger home for their growing family. Home movers changing properties due to relocation for employment often will upgrade according to the house prices of their new area. Without a first-time buyer to show attention in the market to the homes from first time homeowners, things slow down in the market and much of those homes that have difficulty in finding a buyer become part of a landlord’s portfolio and enter the rental market. 

Therefore, it should concern not only home buyers, but homeowners who may someday sell their first purchased property that first-time buyers are becoming rare in the housing market. 

According to a study by Nationwide, home buyers purchasing their first home are having to spend approximately 37% of their take home pay on their mortgage repayments. 

As wages recently increased for many, optimism grew that homeownership would be in reach, but high mortgage rates, and remaining elevated house prices have closed some first-time home buyers out of the market. 

Before the pandemic, first-time home buyers were on the average paying only 28% of their take home pay. 

Not only is it difficult to purchase a home due to house prices and mortgage rates, but saving for a deposit is another hurdle to home ownership. Inflation has made it more difficult to have extra money in the budget to save. Also, the level of the deposit required is much more than it was before the pandemic. Saving for a deposit when house prices and mortgage rates were lower was easier than now. One report estimated it would take most hopeful home buyers over ten years to save for a deposit on a starter home.

There are many that believe a larger supply of homes available for first-time home buyers would help in lowering the demand and therefore the cost of these types of properties. That may take time to accomplish with the current government pledging the addition of over 1.5 million new homes to be built in England over the next five years. 

Lower mortgages are an important part of the equation of getting home buyers onto the property ladder and that has been developing over the course of the last few months.

The Bank of England’s Monetary Policy Committee (MPC) recently lowered the standard base interest rate for the first time since March 2020. The sixteen-year high base rate of 5.25% was cut by 0.25% to 5.0% on 1 August. The lending community gained optimism the economy was on the right track and borrowers would be less of a risk to lend to and began cutting their rate offerings on mortgages and remortgages.

There are currently mortgage rates on the market below 4.0%, but those are not likely to be obtained by first-time buyers as they are associated with low loan to value or LTV ratios. Since first-time buyers are usually putting down 5.0% or 10% deposits, their 95% or 90% LTV would not put them into the category for getting the lowest interest rates from lenders. However, the available rates to first-time buyers are still incredibly attractive.

Home buyers shopping for a mortgage will discover there are lower rates and could also find those lower cost interest rates are offered as a fixed rate and for longer terms. Being able to mortgage for a fixed unexpectedly low interest rate for a five-year term could offer a new homeowner peace of mind that for the next five years they know exactly their repayment amount. If they found it affordable to purchase a home, then most likely they will find it affordable for five years forward. 

Having a fixed rate deal is a popular choice as it helps shield the homeowner from rising interest rates, which happened from 2021 through 2023 as the standard base rate grew from 0.1% to 5.25% and lender rates grew just as rapidly and higher.

It is difficult to become a homeowner in England and it has for many due to the rising interest rates of recent years, been difficult to remain a homeowner. As mortgage terms ended and the lower fixed interest rates obtained in 2020 and 2021 expired, homeowners found themselves facing interest rate choices double or more what they were used to paying.

Shopping online for a remortgage became the go to strategy for discovering how to find the best remortgage deal. It was the path to saving money and making repayments affordable. Now that rates have dropped considerably, those homeowners in search of lower rates and those coming to the end of their mortgage terms in the coming months will find the strategy is still smart. 

It is easy to shop online for a remortgage, and while going from website to website of lenders to gather quotes is possible, one stop shopping with a remortgage broker could put numerous quotes from a variety of top lenders in front of the homeowner to review and compare. Brokers also could have exclusive deals not offered directly from lender to borrower.

The housing market, and therefore the economy, needs first-time buyers. Any effort to help them onto the property ladder should be cheered whether it is increasing the supply of available starter homes on the market, schemes helping with deposits, decreased stamp duty requirements, or lower interest rates. The path to homeownership is not as easy as it once was, but the dream of owning a home is still alive and well and hopefully there are changes occurring to make the dream a reality.