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First-time buyer activity is strong despite Brexit – here’s why


By Ryan Bembridge

Published: 27th March 2019 Last updated: 18th September 2019

Amid the negative headlines about Brexit there’s been a notable trend in recent months – first-time buyer activity seems to be flourishing.

Last year a 12-year high of 370,000 people bought their first property, figures from trade association UK Finance show, and that trend doesn’t seem to diminishing. More than 25,000 first-time buyers took out a mortgage in January 2019, a 5% uptick on the same month in 2018.

Data from the National Association of Estate Agents suggests strong activity continued into February, as the body found that 30% of completed sales in the month were to first-time buyers, up from 26% in January.

Strong negotiating position

Why are first-time buyers coming to the market?

The negative headwinds around Brexit have created an opportunity to get a ‘good’ price on property for the first time in years.

The latest Nationwide house price index puts annual house growth at just 0.4% in the year to February 2019.

Meanwhile in some areas, like London, prices are actually falling, as the lender Gatehouse Bank found that flats in some areas are being sold for 7.5% less than the year before.

Not only can you buy at a cheaper price than a couple of years ago, first-time buyers have a strong negotiating position owing to all the negativity around Brexit.

While it depends on the region where you’re looking to buy, in many cases it’s no longer a seller’s market and there is scope to negotiate on price.

Strong mortgage rates

First-time buyers aren’t just being spurred by cheaper prices, mortgage rates have become incredibly competitive.

Owing to the flat nature of the mortgage market lenders are desperate to get first-time buyers on board, which is reflected in the cheap mortgage rates available.

The average 2-year fix with a 5% deposit is now just 3.30%, down from 4.19% in 2017, according to Moneyfacts.

These rates are so cheap they almost cost the same as buying with a 10% deposit – there’s now just a 0.65% rate difference between them, the smallest rate gap since February 2013.

Government measures

The current environment should also be looked at in the context of government measures in the past few years.

In November 2017 the government abolished stamp duty for first-time buyers who pay up to £300,000.

Meanwhile the Help to Buy equity loan has proved popular. Between April 2013 and September 2018 nearly 200,000 properties were purchased using the scheme, 81% of which were to first-time buyers.

Perhaps it’s not surprising that first-time buyers are still enthusiastic about buying – given the special treatment they’ve received in the recent years.

How long can you wait around?

While Brexit has undoubtedly caused some jitters in the housing market, there’s also the question of how long you can put off buying a flat or house.

Anecdotally you hear that some buyers are waiting in the wings for the uncertainty around Brexit to subside – but it’s difficult to know how long that will take.

It’s fair to say there have been negative headlines and warnings about house price falls before and since the EU Referendum vote in June 2016 – and for some first-time buyers it doesn’t make sense to wait it out forever.

Low rates and a chance to buy at a cheaper price mean for some, the destabilising impact of Brexit uncertainty has been viewed as an opportunity rather than a spectre.

Whether that turns out to be a good call only time will tell.

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