Tue 16 Jun 2020
Should you buy now or wait to buy your first home? What sort of mortgages are available? What sort of deposit is required? These are questions all buyers are asking at the moment, yet this week I would like to focus on Stamford first-time buyers and what it means directly and indirectly to Stamford homeowners looking to move up the Stamford property ladder and Stamford buy-to-let landlords.
Well quite frankly to answer that question, it’s contingent on what Stamford property you are looking to move into and even more significantly, how long you are hoping to live in that property.
We have many armchair economists and even professional economists predicting Armageddon when it comes to the property market, yet the Stamford (and UK) property market is essentially very sound. Don’t forget a previous chancellor, George Osborne warned that if we voted to leave the EU two things would happen; firstly, the UK property market would crash and property values would drop by 18% in the two years after the vote and secondly, there would be an ‘economic shock’ to the country’s economy that would increase the cost of mortgages (through increased interest rates as there would be a run on the GB pound). UK GDP rose by £132bn in the two years after the referendum and interest rates actually dropped and locally, with regard to property values…
Stamford house prices rose by 12.8% in the 2 years following the Brexit vote
Savills have suggested a short dip of 5% during the summer, based on very low transaction numbers, with property prices bouncing back to be just over 15% higher in 5 years’ time. This assumes that the UK plc economic downturn is short and sharp, and that no substantial gap opens up between supply and demand in the property market (i.e. everyone doesn’t dump their property market all at the same time).
Stamford property values after the 2008 Credit Crunch crisis dropped 11.1% between 2008 and the end of 2009.
Yet, the circumstances of the 2008/9 property crash were fundamentally different to today. Many ‘armchair economists’ assume there will be a re-run of the 2008/9 and 1988 property crashes in the coming 12 months in terms of house value falls. Yet, dissimilar to the last recession, this dip has not been led by previous years of strong property price growth like the other two crashes. House prices in many parts of the UK have been down in the last 12 months.
You would think Stamford first-time buyers who have already saved their deposit could grab a bargain in the coming months, as you would believe they would have less competition in the market because of landlords holding back buying additional rental properties. This is because of the press speculation that rent arrears are sky high from tenants who are unable to pay their rent. Yet evidence from many professional bodies in the private rental sector state rent arrears across the whole of the country are appearing to be very low indeed, despite Covid-19.
Interestingly, the firm Yomdel who handles ‘web live chat’ and ‘phone support’ for thousands of estate and letting agents have reported national activity is higher than the two months of the ‘Boris Bounce’ (in January and February 2020). The number of new buyer enquiries for the last two weeks is double (108.9% higher to be precise) than the 2019 yearly rolling average. New landlord enquiries are 32.1% higher than the 2019 average and tenants are 150.1% higher than the 2019 average - these are all great signs and go against the doom-monger economists.
My best advice to all Stamford property buyers is, be they second time buyers, first-time buyers, landlords ... whatever, they should buy with a medium-term view of future Stamford property values, instead of an expectation of always looking to making a quick few pounds flipping a property (i.e. selling it quickly).
Let’s not forget that mortgage interest rates are another important factor: they are at a 325-year low, so borrowing money has never been so cheap. If you know you are going to be living in your first (or second) Stamford home for five years and you want the peace of mind of knowing precisely what your mortgage payments will be, then it’s very attractive. At the time of writing, Barclays are offering any first-time buyer a 95% mortgage on a 5-year fixed rate of 2.95%.
If you take a house in Stamford valued at £352,200 with a 5% deposit of £16,000 on a 35-year term, the mortgage payments would be £1,285 per month (i.e. much cheaper than renting).
Many lenders are lending money even if you are on furlough, yet you may find you won’t be able to borrow as much pre Covid-19. Interestingly, some mortgage companies will even take into account total income, where your employer is topping up the government’s furloughed amount, whilst other lenders will consider mortgage applications on a case-by-case basis. The best advice I can give is, don’t assume what you can or can’t borrow. Speak to a mortgage broker, to see what is possible – not what your friend on Facebook tells you what you can or can’t borrow.
You only need to put down a 5% deposit for the property you would like to buy
If you think about it, it’s inconsequential if Stamford property values drop or not, or if they do drop whether they bounce back quickly (or not as the case maybe) because it’s impossible to know the bottom of the property market. I would say if you find the right Stamford property for you, at the price that feels right, that will be your home together and you are going live in that Stamford property for the next five to ten years, it’s not a bad time to be buying. It’s like waiting for the next piece of tech’ – there will always be a better model or an assumed better time. We are talking about your home here, a home for you and your partner and family, be that your kids, dog, cat, pet or favourite pot plant because…
Spending money on rent is all wasted money – at least when you buy your own home, you start to pay your mortgage off from day one
So many first-time buyers use ‘The Bank of Mum and Dad’ to help with their deposit, yet I have spoken to many parents who wouldn’t want to interfere in their adult children’s life and subsidise day to day expenditure, but are also embarrassed to offer help with the deposit. If you don’t ask …you don’t get!