What Does the Future Look Like for First Time Buyers?

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26 July, 2021

Katie Tyrer
Trainee Solicitor

The residential property market can be difficult to access for first time buyers. This is a result of the increase in the amount of deposit required which has tripled over the last 20 years. Additionally, the current rate of buying activity bolstered by the Stamp Duty Holiday has driven house prices upwards with the average house price reaching a new high in June 2021. This has now been recorded as the busiest month on record for the sale of houses registered with HMRC.

The number of first-time buyers is the lowest it has been since 2016. Ultimately, these factors have made it even harder for first time buyers to get onto the property ladder with the average age of first-time buyers in the UK being 31.

Government help

The government has introduced various schemes to try and ease these difficulties for first time buyers. Such schemes include Help to Buy and encouraging lenders to grant 95% mortgages.

The Help to Buy: Equity Loan scheme was launched in April 2021 and replaced the original Help to Buy ISA scheme. The new scheme will run until March 2023. As with the previous scheme, the government will lend homebuyers up to 20% of the cost of a newly built home, and up to 40% in London. In December 2020 roughly £16,000,000 was paid out via the Help to Buy scheme and the number of first-time buyers increased.

In April of this year, the government launched a scheme to encourage 5% deposits. The number of these available had reduced massively because of the pandemic, as lenders were reluctant to take such a risk whilst the economy was falling. In March there were only five 95% mortgages available, however, this increased to 163 by June.

Current problems for first time buyers

Despite the introduction of various schemes issues remain for first time buyers. Many young people are currently on furlough meaning that they are unlikely to be granted a loan from the bank. This restricts them from being able to gain any benefits from either of the government schemes. Additionally, the 95% mortgages are not available on new build properties which could result in a further spike in house prices.

Looking ahead

The government appear committed to assisting first time buyers onto the property ladder by making increased deposit prices more attainable. However, the demand for housing is likely to remain high and as first-time buyers do not have a property to sell, the supply may remain low. This means that despite deposits being more achievable, there may not be enough houses in the market to supply demand.

Even with attainable deposits we are entering an uncertain period when it comes to unemployment, with the furlough scheme coming to an end in the Autumn, but with COVID cases still high we cannot predict what might happen in the winter months. With young adults, workers in hospitality and those living in London having borne the brunt of job losses in the past year, we can only hope that this doesn't have a dramatic impact on first time buyers.

For more information contact Michelle Thompson in our Residential Conveyancing department via email or phone on 01254 222 349. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

Learn more about our Residential Conveyancing department here

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