While it is difficult enough for those already on the property ladder to access affordable real estate in 2016, it is even harder for first-time buyers. These individuals do not have any existing real estate assets to sell, meaning that they must work hard to save, accumulate wealth and optimise their disposable income levels.
The looming spectre of Brexit is also causing cause for concern for first-time buyers, with growing uncertainty as to the outcome of the upcoming referendum and a potential exit from the EU threatening to increase mortgage rates. Overall, those applying for their first mortgage could be expected to pay £810 more per annum if the UK leaves the European Union, creating a market where housing becomes an increasingly unobtainable goal.
3 of the main challenges facing first-time buyers
With this in mind, let’s go into further detail and consider three of the main challenges facing first-time buyers in the current market: –
House prices continue to rise at a Disproportionate rate to earnings
In recent time, house prices have exploded thanks to a dwindling supply and soaring levels of demand. The rate of growth has posed something of an issue to economists, however, as it has continued to outstrip national earnings and force large demographics out of the market.
The single biggest consequence of this is that first-time buyers are finding it harder than ever to build a viable deposit, as their rate of savings fail to keep pace with exponential price increases. As a result, even buyers that build enough wealth to purchase their chosen property will be forced to take on huge mortgages.
Mortgage lenders are tightening their belts amid wider economic concerns
We have already touched on the impact of Brexit, which is forcing lenders to adopt a conservative approach and tighten their belts. Lenders have already considered raising their interest rates, with a view to offsetting their risk in an uncertain and potentially volatile economic climate.
With recent events having contributed to soaring borrowing levels that are higher than before the 2008 financial crisis, and this stark reality is sure to see a decline in the number of mortgage applications approved in the next 12 months. This is bad news for first-time buyers, who rely heavily on lending to achieve their dreams.
House prices are likely to rise exponentially for the foreseeable future
In the year to February, house prices rose by a staggering 7.6% across the UK. This left the average price of property in the UK at an estimated £284,000, and while this is expected to fall slightly in the third financial quarter this is likely to be little more than a short-term decline. Once the EU referendum has been completed and the UK’s future role in the EU determined, house prices are likely to rebound once again.
This means that if you are an aspiring buyer who cannot afford to invest in real estate in the current market, this is unlikely to change in the future without proactive intervention. Seeking out specialist, first-time buyer mortgages from Saffron Building Society and similar lenders offers an excellent starting point, for example, while optimise your earning potential will also help to build a suitable deposit.