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First time buyers and COVID-19

Written by Ipswich Building Society

8 Jun 2020


COVID-19, First time buyers

5 min read

Undoubtedly, the coronavirus pandemic, and specifically lockdown in the UK, has been a tough time for anyone buying and selling property, but first time buyers in particular have been hit hard. Following a period of saving over many months or years to get that all-important deposit together, only to see the property market all but shut up shop, will have been a blow to many.

Ever-resilient, first time buyers now appear to be kick starting the market, if figures from the estate agents are to be believed. Zoopla, the property portal, saw a 350% rise in the number of people looking to get on the property ladder as the government lifted restrictions on the industry in mid May. Similarly, Hamptons and Countrywide also saw a rise in interest from first time buyers now lockdown rules are easing.

First time buyers don’t need to be overly concerned about the prospects of buying their first home soon: many providers are returning to the market and as long as the individual has around six months’ employment history with their current employer or 12 months’ consecutive employment history, they shouldn’t struggle in being accepted.

The F word

Many banks and building societies will accept first time buyers who have been furloughed as a result of coronavirus but only up to 80% of salary and a maximum of £2,500 per month when assessing affordability. Evidence of entitlement is usually required as proof of furlough, so first time buyers need to make sure the paperwork is all in place.

For those who have been made redundant or don’t have a significant period of work history, then it is usually advisable to wait a little longer before applying, to secure a better deal.

Lockdown hold on valuations is lifted

During the first stage of lockdown, valuers were unable to get out to visit properties to assess whether they were worth the money being lent. This affected all sales but now valuers are able to get out to more properties and many have also altered their working practices so they can undertake online valuations. First time buyers generally buy fairly straightforward properties than those further up the chain, so once the backlog of lockdown valuations is cleared, this may mean valuations can happen more rapidly than they did pre COVID-19.

Pre-application preparation

First time buyers should use this time to concentrate on preparing for their mortgage application; building their credit score and, crucially, ensuring they have no missed payments. This is incredibly important just before making a new mortgage application.

Another really positive step to take is to divert any surplus income during lockdown to increase their deposit. This could include saving any travel or fuel costs, money that might have been spent on going out or takeaways – typically the bigger the deposit, the better mortgage rate they’ll be able to access. Even if they have a reasonable sized deposit already, having extra funds for carpets, curtains and new furniture is always useful.

Consider alternative routes to purchase

First time buyers, particularly those in areas where house prices are high, may benefit from alternative routes to getting on to the property ladder. Shared ownership and part-buy part-rent schemes with local housing associations are worth looking into.

Gifted deposits

And whilst the thought of being financially independent is a good one, if first time buyers have any family members who could give them a lump sum, many mortgage providers are now accepting what is known as ‘gifted deposit’ mortgages, which can also give first time buyers that crucial leg up on to the property ladder. Research from Savills, quantified this with nearly a third of over 60s saying they are now more inclined to help their children by gifting or lending them deposit money.

Location, location, location

Property prices are very much dependent on desirability and the supply and demand in a particular postcode or area. Historically, first time buyers were less bothered about being in catchment for a good primary school for example and much more likely to be interested in local amenities such as bars and cafes. Now that the average age of a first time buyer is mid 30s, these generalisations do not necessarily hold – one thing that COVID-19 has taught us all is that a great number of us can successfully work from home.

Property prices in towns and cities were always much higher if they were within walking distance of a good transport network – be that bus, train, tube or tram. However, perhaps one outcome of the pandemic will be that there will be less need to make a daily commute, which for first time buyers may mean more room for price negotiations or even a willingness to consider new (cheaper?) locations altogether.

Buying your first property after coronavirus

There’s absolutely no reason why first time buyers will not be as attractive a prospect to banks and building societies as other buyers in the future. However this group would be really wise to use these strange times to review their situation, to maximise their deposit, and to consider whether their decision on where to buy is still as valid as it was pre coronavirus.

This article was published under our previous name of Ipswich Building Society. We changed our name in 2021 – find out more.

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