FINANCE
A worry shared…
EXPERT COMMENT In May, double-digit house price rises hit the dizzying heights we last saw just before the onset of the financial crisis. We’re not expecting precipitous falls, but rises are unlikely to be as steep in the coming months. It usually takes a shock to the system to upset the housing market: like interest rates rises, unemployment or recession. None of these are forecast to be a major problem for the next few years. Anyone currently saving to buy a house will be desperately hoping the market pauses for breath. First time buyers
Buying your first home is inevitably a nerve-racking experience – but doing your research and planning ahead can put to rest some of the worst of the worries, says Kay Hill
have spent months running to stand still when saving for a deposit, as their target moved further out of reach each month. If price rises slow, it will give them an opportunity to catch up. If you’re saving for your first home, and expect to buy at least a year down the line, it’s worth
It’s normal to be a bit nervous about any major life decision – but first time buyers have more on their minds than most. The mortgage experts at money.co.uk surveyed 1,501 first time buyers to find out their worst worries – and here at First Time Buyer we hope we can address these and make it all a bit less stressful.
NEGATIVE EQUITY The number one worry listed by 31% of respondents was that the value of their house might drop – especially falling into negative equity, where the value drops lower than the outstanding mortgage. It is true that house prices can go down as well as up – Office for National Statistics figures show, for example, that between
February 2008 and February 2009, prices dropped by 15.5%, and didn’t fully recover until 2012. However, the circumstances at the time were extreme, and today there seems to be a consensus that despite all the challenges of Brexit and Covid-19, house prices are likely to slow rather than crash. If you are still concerned, then there are things you can do to mitigate the risk: • Put down as big a deposit as possible. Not only will this give you access to lower mortgage interest rates, but it also makes negative equity far less likely • Take out a longer term fixed rate mortgage so you won’t need to remortgage in the near future (remortgaging is impossible in negative equity, so you end up on the very expensive standard variable rate)
considering a Lifetime ISA for the first £4,000 of your savings each year. The Government will top it up by 25% – so every year you could get £1,000 of free money from the Government. So much of buying a property feels like endless striving with little reward that it’s a welcome change to get something for nothing.
Sarah Coles, Personal Finance Analyst, Hargreaves Lansdown
112 First Time Buyer October/November 2021
FTB 112-113 Finance October-November21.indd 112
13/09/2021 17:57
