How’s the housing market for first time buyers?

With economic growth back on track and the job market showing signs of recovery, you may be considering the idea of buying your first home. However, getting on the first step of the ladder can be a particularly frustrating experience if you are a first-time homebuyer. Despite a slowdown in the housing market in the latter half of 2014, the cost of homes for first-time buyers increased by around 9% over the entire year.

Multiple challenges for first-time buyers

Since home deposits are calculated as a proportion of the cost of the home, with deposit requirements already being too high, first-time buyers planning to finance the deposit through personal savings are being squeezed out of the market.

Drastic variations in the rate of increase in property prices around the country, with London property prices rising by around 18% in a single year, means that you may find it virtually impossible to buy property in an attractive and developed part of the country.

This already difficult situation is further complicated by the stringent requirements being imposed by lenders. Fearing another housing bubble, the Bank of England forced banks to cut the loan to value ratio, which resulted in buyers being required to pay higher deposits to become eligible for housing loans.

Furthermore, lenders approve loans only if they are satisfied that you can afford the housing loan repayments even after interest rates rise. This approval is based on subjective, and often vague, analysis of your spending habits.

Numerous advantages and opportunities as well

However, some positive factors are aiding first-time homebuyers. For starters, the low interest rate regime has softened the blow of the galloping prices. Secondly, government intervention has eased the unreasonably high deposit requirement for many first-time buyers. Intense competition between lenders has resulted in a price war that is helping buyers get cheaper loans. Finally, steady economic growth and the improved job markets are encouraging young buyers to proceed with confidence.

Buying a home is a major financial decision, and you cannot expect a completely smooth ride. The various hurdles towards buying your first home can be overcome through a combination of sensible planning, smart research, and aggressive negotiation. Find out if you qualify for the government scheme aimed at helping buyers bypass stringent deposit requirements. Study the property market in your city to identify undervalued areas that are likely to be developed in the future.

Learn more about the various options at your disposal by doing research online. You can also compare mortgages on the internet at no cost. This simple exercise can help you identify lenders offering the best deals at the cheapest rates. Further online comparison will enable you to negotiate with lenders from a position of strength. Even a minor reduction in interest rates can translate into huge savings over the long run.

Be prepared for a tough process ahead when purchasing your first home. There are many challenges, with rising prices and deposits being the biggest obstacles, along with numerous opportunities for the smart buyer. Use online resources well to improve your chances of finding the right property at the most affordable price.

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