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First-time buyer: is now a good time to buy?

First-time buyer: is now a good time to buy?
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On 14 September, the Bank of England published the Mortgage Lenders and Administrators Statistics for Q2 of 2021. Sarah Coles, personal finance analyst at Hargreaves Lansdown, reviewed the mortgage data, and it appears first-time buyer FOMO helped mortgage lending boom to a record high since the financial crisis. So, if you’re a first-time buyer, is now a good time to buy? I take a look.

What are the key findings of the report?

The Bank of England reviews mortgage lending activities from data provided by around 340 regulated mortgage lenders and administrators every quarter. It then releases its findings through the Mortgage Lenders and Administrators Return. Here are the key findings for Q2 2021:

  • The sum total of mortgages lent between April and June was around £89 billion, the highest since 2007.
  • 66.4% of these mortgages were taken out by people who bought houses to live in rather than sell or let.
  • Of the 66.4%, 24.7% were first-time buyers, 6.5% more than the same time a year earlier.
  • The value of new mortgage commitments for the coming months is £85.6 billion, almost 2.5 times more than a year earlier, but still lower than the peak in 2020 Q4.

What are the benefits of being a first-time buyer?

A first-time buyer is exempt from Stamp Duty on properties worth up to £300,000. On properties worth between £300,000-£500,000, they only pay 5% Stamp Duty. However, if they purchase a property with a value of £500,000 or more, they won’t qualify for this exemption.

With the average house price currently at £262,954 (August 2021), a first-time buyer is unlikely to have to pay Stamp Duty.

The government has also introduced many schemes to help first-time buyers get on the property ladder. You can take a look at the ownyourhome.gov.uk website to find out more.

Should first-time buyers buy in 2021?

Mortgage commitments for the coming months indicate a slight fall in sales, meaning home sales may ease after record highs in August. The end of the Stamp Duty holiday is seeing demand from buyers tail off, leading to fewer home sales.

However, statistics reveal that real strength remains in the first-time buyer market. The data shows that first-time buyers make up a more significant proportion of mortgage borrowers than at any other time since the pandemic began.

This could be due to the government’s homeownership schemes, government guarantees for higher loan-to-value mortgages, reduced mortgage rates and some buyers being able to save more money during lockdowns.

Also, according to Sarah Coles, as house prices rose, FOMO made many aspiring buyers take the plunge before prices soared out of reach.

So, should first-time buyers buy in 2021? The data shows that many factors currently favour first-time buyers, and it could be wise to take advantage. However, keep in mind that the ideal time to buy a house is always when your circumstances best allow you to do so.

If you’re ready to take the plunge, check out our mortgages guide which contains tools and guidance to consider when applying for a mortgage. And since it’s your first purchase, considering the services of an independent financial adviser is always a good idea.

5 ‘must-see’ mortgage tips to help save money…

The mortgage application process can seem overwhelming, and down-right unaffordable at times. So where do you start if you’re looking to save money on your mortgage?

We’ve created this free report, “5 must-see tips to save money on a mortgage” to help you learn where the money-saving opportunities may be…

Just enter your email below for instant access to your free copy.

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