The Property Market doesn’t need First Time Buyers

First Time Buyers

The Property Market doesn’t need First Time Buyers

As a top London Mortgage Broker we’ve experienced time and time again in our business the awful feeling that just because something doesn’t feel right – it doesn’t mean it isn’t true.

Right now, we have a feeling the news is not good at all for first time buyers.

Apocalyptic talk around the property market just hasn’t come true. If there was ever a great environment for a property crash – surely 2008 – 2013 provided it? Massive financial, economic, political and banking chaos and uncertainty. Coming after years of boom and really high house price rises.

Perfect scenario for a London house price crash. It did not happen.

Our First Time Buyer Predictions

So what now for first time buyers? There is still a bit of chat about what will happen when rates go up. Well we have seen property prices rising steeply even when interest rates were rising (think 2002 – 2007).

Traditional chat (and perhaps moral wellbeing) suggests that when banks get their act together (with higher loan to values in particular), when national incomes rise a little and stability and certainty come back then first time buyers will enter the property market in droves – bringing fresh property owners, cash and momentum and a general feeling of socio demographic fluffiness.

That’s how it has always been – so that’s what will happen this time.

Right? We think this is completely wrong. This is not how it’s going to be.

Making London’s professionals prosperous

London’s professionals and our clients are aspirational. People have learnt about our Boom & Bust culture.

Homeowners are remortgaging equity out of property to buy another. They are leveraging up. In the last post-recession period of 1992-1997 it took a long time for this momentum to gather. This time it is happening much more quickly.

And this time, the banks would rather lend to a buy to let investor than a first time buyer. Reason – a bank is concerned with making money. That’s it. A BTL investor represents a better proposition to a bank (higher deposit, current property owner, experienced mortgage holder, greater financial resources, more likely to complete on the mortgage, much less paperwork and processing) AND the bank can charge higher rates and fees for buy to lets with their limited lending funds.

This is what will drive the new phase in the property market. A side effect will be that first time buyers get left even further behind.

Property ownership in the UK will increasingly become the remit of the few – the wealthy – rather than all. If that has left you feeling a little rattled – sorry. But you can still do something about it.

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