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How the pandemic has forced out first-time buyers

The Covid-19 pandemic has had a startling effect on the UK housing market, with first-time buyers particularly affected.

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Analysis suggests that almost 90% of mortgage products designed for those trying to make their first steps on the property ladder have been withdrawn. Many lenders have acted since March 2020 to remove 90-95% loan-to-value mortgages from their portfolios.

Triple deposits

The most startling example of this was from the country’s biggest lender Nationwide which reduced the property value it would lend against by ten per cent to 85%. In real terms, this means buyers will have to triple the deposit they will have to provide before they can access a mortgage.

Add to this that the government urged house buyers to put their moves on hold in March when the pandemic began, and it is clear that the future for first-time buyers is bleak. A recent survey suggests 62% have opted to delay until 2021, and it is estimated that some £5bn of deposits are currently being held over whilst we wait for the end of the pandemic and the revival of the market.

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Ironically this comes at a time when house prices are expected to fall whilst the market remains in the grip of the national emergency.

Stamp Duty

One reason to press ahead with a purchase as soon as possible is that the Stamp Duty Land Tax (SDLT) regulations which the government introduced in July will expire on 31/03/2021. Under these temporary rules, the threshold for SDLT is £500,000 (Stamp Duty Land Tax: temporary reduced rates – GOV.UK (www.gov.uk)).

Those lucky enough to be in the process of buying a property will want to proceed as quickly as possible when they get the green light. One of the things they will want to do is to have a home buyers survey carried out as quickly as possible. Information on how to do this can be found at sites such as https://www.samconveyancing.co.uk/Homebuyers-Survey.

One of the reasons for the tightening of the market is the overall economic uncertainty that Covid-19 has introduced into the job market. Lenders are concerned about what will happen when the government’s furlough scheme finally ends, and how it will impact on their borrowers’ ability to make repayments, especially younger first-time buyers.

All-in-all these are stormy times for first-time buyers, and mortgage restrictions are unlikely to loosen any time soon.

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