How will Brexit and rising deposits affect the first-time buyer market?

Take, for instance, those would-be homeowners and the level of deposit they need to get on the housing ladder. Recent research from Santander suggested that large numbers of would-be FTBs are under-estimating the level of deposit required, and in many cases, are just not saving enough to be able to meet this level.

In a survey of 5,000 adults aged between 18-40, 42% had saved nothing towards their first home – perhaps they are to rely on the Bank of Mum & Dad instead – while the average savings pot stood at just over £8k with the individuals concerned saying they were hoping to hit a target amount of close to £25k.

Sounds like a lot, right? Well, it is, but when the average deposit put down by a first-timer is actually £44k – figures from the ONS in March this year – then you can see just how far they need to go, and just how far away from the amount required most individuals are. It’s perhaps no wonder, that in such circumstances, many potential purchasers would have no option to either put their ownership plans on hold for the foreseeable future, or to seek parental help and support in order to get them to the levels required.

Of course, this is not a new problem for first-timers to overcome – the ability to raise the necessary deposit has been the number one obstacle to get over for generation after generation of new buyers. But, it’s perhaps the huge amount of money required that sets this generation apart in terms of their home ownership aspirations – a problem I think under-estimated by previous generations who can tend to suggest that it’s always been difficult to buy a first home. Well, it’s never been this difficult, hence the requirement for parents/grandparents to put their hand in their pocket with greater regularity.

What we also have at present, of course, is that the picture is absolutely complicated by the political situation regarding Brexit, and the huge amount of uncertainty that potential first-time buyers must be feeling about whether now is the right time to be buying anyway.

Again, research suggests the whole Brexit picture is having a significant impact on the decisions – or rather lack of decisions – being made currently. According to Aldermore, 47% of prospective first-time buyers have altered their plans because of the delay to Brexit – 24% delayed buying, with 16% of these on hold for over 12 months. Anyone suggesting that this pre-Brexit impasse isn’t having an effect on the UK housing market are living in cloud cuckoo land.

Conversely, 22% said they had brought their plans forward in terms of purchasing, with 10% having done so by three months, and 12% by over six months. To my mind, this shows the importance of purchasing a first home for many people – especially at a time when many economists are predicting a somewhat severe house price impact if the UK leaves the EU without a deal. Some of these predictions have been apocalyptic and would send these first-time buyers potentially into negative equity very quickly if they were realised. And yet they have gone ahead, perhaps because they want to be certain they can purchase now, whereas in the future that certainty might well dissipate to nothing.

It is a confused picture for all, and Brexit adds a further layer of confusion that none of us have experienced before. In this environment, the need for quality mortgage advice has perhaps never been so great – how else might prospective first-time buyers understand what is available to them, and what they need to put on the table (deposit-wise) before they can get to a point of purchase. There is also a need from a lender perspective to ensure the level of high LTV mortgage availability continues to grow, so that those who cannot put down huge amounts of money still have the chance to purchase a first home.

In that sense, we all have a role to play in terms of advice and education, however we may have to wait further for more clarity around Brexit, before we finally start to see confidence return and more ‘normality’ injected into our market.