First-time buyer numbers dipping as deposits become unaffordable

With interest rates cut to historically low levels, first time buyers are seeing their attempts to save for a deposit being stymied while their potential mortgage rates are increased, preventing many from buying a house.
When the Bank of England cut interest rates this summer in order to make lending cheaper, it was hoped that first-time buyers would take the opportunity to borrow from lenders to get themselves on the property ladder. The result so far, however, is the opposite of what was expected.

With interest rates now at a historic low of 0.25%, those potential buyers using high-interest savings accounts are seeing their funds fail to grow as they have done previously. With rising house prices, and the average cost of a home reaching £214,000 according to the Office of National Statistics, first-time buyers are finding themselves needing a minimum deposit of £24,880 to qualify for a mortgage.

This news is perhaps unsurprising given that a study by the consumer watchdog Which? Has found that the number of first-time buyers in the market has dropped by a third over the last 20 years.

As well as reducing the interest rates on savings accounts (those with Santander’s 123 account found their interest rates halved from 3% to 1.5%), lenders such as Halifax and Lloyds have also been increasing the interest rates on new mortgages, with many property buying experts believing that they are stealthily doing so in order to boost profits in an unsure market as a result of the Brexit vote.

“Lenders have done this because ultra-low Bank rates directly affect their profitability,” said Andrew Montlake, a mortgage expert at Coreco.

“It is a sneaky attempt by banks to protect their own margins, but this kind of move is not uncommon in a falling market.”

While there are still initiatives to help first-time buyers, such as Help-To-Buy ISAs and the upcoming Lifetime ISA, in the short term, those looking for a fast house sale are looking at a reduction of the number of buyers in the market and as a result a lower asking price. However, there are property buying companies who are willing to offer competitive prices in cash for any home regardless of condition or location, which will allow vendors to move their life along with confidence.

Need to sell but can’t find a buyer? Why not ask National Homebuyers for advice, as we buy any house. Call 08000 443 911 or request a call back to find out how much you could get for your property.