Many of us dream of buying a home – but what are the key factors that put people off getting onto the property ladder?
According to research the number one factor is the size of the deposit that would be buyers need to raise.
Holding off buying
The Halifax Housing Market Confidence Tracker follows how the general public feel about property market, including the reasons why they wouldn’t buy a house. By far the most common barrier to those entering the housing market is raising the deposit, with 61% of people saying that this is an issue for them. The Mortgage Advice Bureau also recently released figures suggesting that the average deposit needed to buy a house in the UK was now £71,078, so it’s no surprise that some potential buyers may struggle to raise that much money upfront.
Another common reason people were put off buying a house was job security, with half of those surveyed saying that is preventing them from buying. After the introduction of the Mortgage Market Review in April 2014, lenders now have to be stricter on who they give a mortgage to, as they have to be sure that people will be able to afford to repay it now and if their situation changes in future. Potential borrowers have to be able to show that they will be able to make their repayments, so if they are on a temporary contract at work or have changed jobs a lot, this could mean that they wouldn’t be able to afford a mortgage, or be eligible for one.
Some of the other reasons that would-be buyers are holding off getting onto the property ladder include families’ household finances, rising property prices, and a shortage of properties for sale. Interestingly, concerns about interest rates rising may be becoming less of a barrier to people buying property, as only 13% of respondents say that this is something they think about. This is down from 19% in the third quarter of 2014. The Bank of England’s base interest rate dropped to a record low of 0.5% in March 2009 and recent reports suggest it could stay that way for up to another year. Some potential buyers aren’t feeling the pressure and may no longer think that they have to rush to buy and lock onto a good mortgage deal.
Buying and fixing
If you’re waiting to buy because you think that interest rates are likely to stay low for a while, you could miss out on the deals that are currently available. Interest rates will certainly rise at some point, even if no one’s exactly sure when that will be, so if there’s no other barrier to you getting on the property ladder, it might be a good time to think about buying a house.
Fixing into a two year, five year, or even 10 year fixed rate deal means that you could get a mortgage at a rate that is at historically unusually low levels, and you’ll be locked in if interest rates rise. The better deals are usually for those with a bigger deposit, but there are also some attractive products around for first-time buyers. Bear in mind that if you fix your mortgage based on current interest rates you won’t benefit in the (unlikely) event that the base rate falls further. However, it does mean that you’ll know exactly how much your mortgage repayment will be for the period of your fixed rate, which should make it easier to budget for every month.