OK before we get going, spoiler alert, we haven’t found a time machine to take first time buyers back to ‘the good old days’ when you could get a mortgage to buy your first home for less than three times the amount you earned.
These days, the barriers to getting on to the housing ladder remain due to a shortage of housing stock for first time buyers, house building targets being missed for years on end, wages being worth less than they were in 2008, and weak growth predicted in the near future. Throw in, record inflation and a major jump in interest rates and you could begin to understand why this author is thinking “I’d better get on with explaining why there is a glimmer of hope for first time buyers in 2024!”
So, here goes… house prices are coming down, inflation is coming down and interest rates might have reached their peak and will start to come down (albeit not to the rates homeowners have got used to over the past 15 years) and lenders are trying to review criteria, lending policy and incentives to make buying a property more feasible or easier.
House prices due to fall in 2024
The only bit of good news for first time buyers following the infamous ‘mini-budget’ was that it triggered a decline in house prices. According to Savills, UK house prices will have fallen 7% from that event in September 2022 to the end of this year. They also predict that prices will fall by a further 3% in 2024 meaning that the average price of a house in the UK will be £246,950 by the end of that year. However, the trend will reverse into a steady rise in house prices from 2025 to 2028 which will take the average national house price to £300,108.
Fewer people active in the housing market
Savills also predict that there will be less competition for house purchases, a welcome change from the madness we’ve had lately. Therefore, you might even get to view a property which would be nice. Many of the first time buyers we’ve helped to get on the housing ladder in recent years were fed up with hearing the property was sold before they could even look at it!
Interest rates predicted to come down
As for interest rates, there is plenty of commentary that they have peaked or not far from the peak. The Bank of England base rate has remained at 5.25% for the past couple of months and we are starting to see more lenders offering fixed rates at below 5% for the first time since September 2022. For example, at a purchase price of £230,000 with a 5% deposit of £11,500, a 2 year fixed rate would have monthly payments of £1260 and a 5 year fixed rate £1151.
Summary
Our experience tells us that buying your first home is difficult and takes considerable planning but it isn’t impossible. So if buying a property for the first time is part of your financial plan and you’ve been saving towards that goal, 2024 could be a good time to take a closer look.
If you would like to explore your options please feel free to get in touch for a free consultation.