As the Government and the opposition parties duke it out in parliament over the Brexit deal, Britain is going nervously about its daily business, each day wondering how and when it’s all going to end — and how it will affect them. Business owners ask how it will affect their business, everyday workers ask how it will affect their jobs, families ask how it will affect the cost of living and homebuyers ask how it will affect mortgages and property prices. Answers to these questions seem to be few and far between.
The mood among the public is pessimistic, but in the mortgage brokerage industry, however, voices of optimism are starting to emerge. And it’s good news for the first-time home buyers. Although Brexit may feel like an impending Armageddon to the rest of Britain, professionals in the industry have signalled that first-time buyers have very little to fear. The property market is looking most inviting, in fact.
The situation just now
Whether it’s the folly of youth or simply a more carefree ‘que sera sera’ attitude, Brexit doesn’t seem to be bothering first-time buyers in the slightest.
Helmut Elstner, an independent mortgage advisor at mortgage brokerage The Mortgage Clinic, explained: “I would say that nearly 80% of all mortgages that our firm has been advising on and arranging over the past year are with first-time buyers. There is pretty good confidence at the moment, but certainly some fears need to be addressed.”
That’s not to say, however, they’re just not taking the matter seriously or are burying their heads in the sand while the rest of the nation gets on with the debate. Two of the major concerns first-time buyers have voiced have been around whether interest rates will increase and whether property prices will fall, both of which could have a significant impact on their finances.
Elstner notes these concerns come as a time when the market was just starting to breathe easy again following the property market crash in 2007.
He added: “The concerns include: Will property prices go down after Brexit? Will interest rates go up? And the answer is ‘Obviously’, since the vote to leave the EU this has introduced uncertainty in the property market, and the wider UK economy.
“This did not exist prior to the Brexit referendum, but we had not long suffered the worst property market crash in the whole of the UK after 2007, so we were in the early years of recovery and confidence was just starting to return to the market. The most common concern was ‘When are interest rates going to go up?’ and ‘By how much’?”
The good news to have come out of the property crash— albeit the hard way, some would say — was that a few lessons were learned both on the buyers’ side and on the financial service sector’s side. Buyers seem to have done their homework on saving and investment since the crash and appear to be looking further into the future when it comes to their financial planning. Meanwhile, mortgage providers have had a long, hard think about the types of mortgages they offer and some of the terms and conditions that come with them.
Elstner and his team at The Mortgage Clinic believe first-time buyers today are much more knowledgeable than before when it comes to buying a property.
He said: “They are much better prepared. Most have been saving up good deposits over the last few years, investing in Help to buy ISAs which is a government scheme. They are better informed — having seen the property crash they are generally more cautious, conscious of trying to take advantage of the best deals and low interest rates.
“Pre property crash there were 100% mortgages, and interest only options available. Thank God these don’t exist anymore.”
Is it, then, a question of playing the long game?
First-time buyers are planning longer term, and this may be the key when thinking about buying for the first time. In the latest financial quarter, Northern Ireland turned out to be the most affordable region of the UK for housing. This is despite also being the region that displayed the highest growth in price in the same quarter, so just now things couldn’t be better for climbing on to the property ladder.
Elstner remains confident the market will remain good to first-time buyers after Brexit: “The housing market for first time buyers in Northern Ireland is at present healthy and showing strong growth, which we expect to continue post Brexit, particularly as it is cheaper to buy than to rent with a deposit. It is an excellent time to buy your first home with Northern Ireland the top performing region of the UK in 2018, according to the Nationwide Building Society house price index report published recently.
“However, Brexit brings uncertainty and caution to us all, but when taking the longer term view that should always be applied to property purchases, I firmly believe Northern Ireland as a region will remain stable and continue to perform very well.”
So what do first-time buyers have to worry about, if anything at all?
If Brexit is going to affect anyone, the suggestion is that it’s more likely to be people who are second-time buyers than first-time ones, or that Brexit will affect more expensive properties. First-time buyers are only likely to receive a few scratches, if any at all. These repercussions could come if people who are moving decide not to sell up, but even if there was a Brexit-induced property crash, the consequences for first-time buyers wouldn’t be too heavy.
“I don’t believe the first time buyer sector of the market will be really affected, broadly thinking of values up to £150,000” said Elstner, adding: “I think there will certainly be an effect on the less busy sections of the property market, the home mover market, and the upper valued properties. These are the most fragile sectors of the market where demand is much lower.
“I think the first time buyer sector will remain strong, but probably subject to stock levels if sellers are put off moving. Currently, first time buyers can still purchase properties cheaper than renting if they can save a minimum of 5% deposit.”
For example, here is a selection of first time buyer stock examples from Estate Agent, Gerard McClinton of Hampton Estates.
Mortgage repayment based on a 25 year mortgage, 2 years fixed, 5% deposit
- 2 bed terrace, BT7. On the market for £107,500 with a rental value of £625 = mortgage repayment up to £500 per month (for the best deals)
- 2 bed apartment, BT7. On the market for £115,000 with a rental value of £650 = mortgage repayment up to £536 per month (for the best deals)
- 2 bed apartment, BT8. On the market for £120,000 with a rental value of £650 = mortgage repayment up to £559 per month (for the best deals)
- 3 bed terrace, BT7. On the market for £125,000 with a rental value of £700 = mortgage repayment up to £582 per month (for the best deals)
4 Things Every First Time Buyer Should Consider
Regardless of the goings-on in UK politics just now, there are still things that first-time buyers should consider. Here are Helmut Elstner from The Mortgage Clinic’s top tips:
First-time buyers should aim to save at least a 5% deposit.
It is a good idea to take advantage of government schemes, such as opening a Help to Buy ISA. The Government will top up their savings by 25% when using these savings to purchase their first home.
3. Credit Check
Before starting any process it’s important to check your credit reports and history, and make sure there are no missed or defaulted payments on credit commitments.
4. Get Advice
Go and see a professional, independent mortgage adviser for mortgage planning to ensure their plan is on track before viewing a property and bidding on it.
First-Time Buyers: What To Do About Your Brexit Concerns
Brexit may be stealing all the headlines, but first time buyers still have other concerns as well.
According to Helmut Elstner from The Mortgage Clinic they are:
Can I get a mortgage?
How much can I afford to borrow? And what will it cost per month?
How much deposit do I need to save?
So what can buyers do if they have these concerns?
The good news is, that consumers who have these concerns don’t have to dip into the money they’re saving for their first property and spend it on an expensive financial planner or adviser straightaway.
First-time buyers can attend The Mortgage Clinic for a mortgage planning consultation free in which their advisor will outline what they can expect to find out in the consultation.
“We offer free first-time buyer mortgage planning consultations, where we will answer all of their questions & queries [first time buyers]” said Elstner.
And he aims to have people leaving with answers to:
- How likely it is for them to gain a successful mortgage application.
- How much they can afford to borrow, helping them set a budget for properties to start viewing.
- How much deposit they will need to save.
- How much a mortgage will cost per month for their defined budget.
- An overview of the mortgage process, steps involved, and timescales involved.
Despite the nation walking with a Brexit-shaped cloud over their heads just now, it would appear the time is right for first-time buyers to make their move. They should still make all the right preparations for purchasing a property, but regardless of what happens when — or even, if— the UK leaves the European Union, right now it looks like first-time buyers will be the ones that will walk away with a good deal.
The Mortgage Clinic is an independent mortgage broker and operates from its offices in Belfast, Northern Ireland. Contact us today for FREE independent mortgage planning advice
By Peter Jenkins, Excalibur Press