A return of more competitive pricing is good news for first-time buyers

It has, without doubt, been a very maddening end to the year, certainly for the significant number of wannabe first-time buyers who prior to the ‘Mini Budget’ thought they were in a position to get onto the housing ladder.

Since then I have heard plenty of anecdotal evidence where the clients found themselves in a position where they couldn’t access the finance required any more, or they simply couldn’t afford what was subsequently offered to them, as lenders pulled products, upped rates and affordability measures moved beyond what was achievable for those would-be borrowers.

It was, and is, a less than ideal situation and what will make it even more galling for those concerned is that they did nothing wrong and their ability to buy a first home was taken out of their hands by some monumentally stupid political decisions. What can you do?

The more positive news of course is that we have moved on from that end of September/October period when it looked like ‘the only way was up’ with regard to mortgage product rates, and that certain fixed-rate products might take months to return, and where higher LTV mortgages were at an absolute premium.

Let’s make no bones about it, we are still not in a fully pre-‘Mini Budget’ position for a lot of the mortgage market – certainly when it comes to product pricing – however we have sailed into calmer waters and as a result the outlook for the journey ahead is much less stormy than it was in early Autumn.

For a start, it looks on the surface like lenders do have some leeway in terms of pricing and we might expect the start of a new year will provide something of a reset when it comes to the rates they are able to offer.

As I write, swap rates are tracking some way below what lenders are offering to borrowers, however give this market a few weeks and with yearly targets to hit in a 12-month period where activity is anticipated to be down – particularly purchasing – we might see some double-quick moves from the lender community as they hurdle over themselves in order to secure the market share they require.

That should be good news for first-timers if it sees a return of more competitive pricing and much-needed higher LTV product choice. It will also make affordability a little less challenging, although I’m also of the opinion that lenders could be a little bit more flexible in this area.

We’re all acutely aware that many would-be purchasers are already paying well in advance of the mortgage payment they could secure in rental payments each month, yet there’s little scope within most lenders’ criteria to actual use this as a benchmark for ongoing mortgage affordability. My view is that, by doing this, we would genuinely be taking into account the way an individual(s) considers their housing needs. If you have made rental payments each and every month over a period of time, and that rent is above what you would pay on a mortgage, what are the chances that you are going to suddenly stop prioritising those housing costs?

The other point to note here is of course house prices. After a period post-pandemic when prices have reached double-digit highs each year, the likelihood is that prices will fall next year. Again, that would be helpful to first-timers in terms of helping them get on the ladder, and for those who are overly worried about this happening, the fact that any falls are only likely to take values down to a point where they were about 12-18 months ago, should hopefully make those worries not so severe.

We need a period where prices stabilise, and if – as anticipated – inflation falls, and rates continue to drop, then even if incomes are not rising by as much as many people would want, it hopefully delivers a more benign environment to get that much-needed new blood into the market.

Understandably there have been plenty of frustrated individuals in recent months, especially those that would have been tantalisingly close to securing that first property.

However, if anything, the outlook for them may look a little bit better in 2023 and if, as I suspect, they have already been waiting a considerable amount of time to get on the ladder, by waiting just that little bit longer, they could eventually find themselves in a better situation. The market certainly needs to keep first-timers coming through, and I hope we can see this in greater numbers next year.