Coronavirus Hits First-Time Buyers Over Mortgages

First-time buyers are shelving their home-buying plans due to the effects of Covid-19 on mortgage availability and personal finances.

Almost half (46%) of first-time buyers told business bank Aldermore that their plans to move home had been delayed by nearly a year as a result of the virus.

The survey reported that first-time property shoppers faced multiple challenges over lockdown, with one in six having had a property sale fall through during the lockdown, and even more (one in five) deciding to pull out of a deal during the same period.

First-time buyers experience strong financial and emotional challenges at the best of times as they go through the home buying journey, but it appears now this has been heightened by Covid-19.

Said: Jon Cooper, head of mortgage distribution at Aldermore

The problems faced by first-time buyers are likely to have been made worse by the shelving of low-LTV mortgages by most high street lenders early on during the pandemic.

These low-deposit mortgages are usually popular with first-time buyers trying to get a foot on the property ladder, as lenders often accept deposits as low as just 10%, meaning that buyers have to save less of a down-payment before they move.

However, low-deposit mortgages are considered high-risk by lenders, and as the economic impact of Covid-19 becomes clear, banks have shied away from them. Since the start of September, no high street bank has offered a 10% deposit mortgage deal, potentially leaving would-be buyers with thousands more to save before buying a home can become a reality.

Yet despite the gloomy economic outlook, many say they still dream of owning their own home. In the Aldermore research, 42% said that lockdown had only spurred their desire to buy their own home, despite just as many saying that the experience had been made more stressful by the pandemic.

The Stamp Duty holiday is another key motivator for shoppers, with over a quarter of those surveyed saying they would bring their plans forward to try and benefit from the temporary duty break.

The Stamp Duty holiday is a tax break announced by Chancellor Rishi Sunak in an attempt to stimulate the housing market amid the economic gridlock resulting from the pandemic.

Under the policy, buyers won't pay any stamp duty on homes under £500,000 until 31st March 2021.

According to online broker Zoopla, this means that more than 9 in 10 homes will be stamp-duty free during this time, compared to an average of just 16%.

Aldermore's Jon Cooper said the survey showed 'encouraging' signs, but first-time buyers would still need help to seal the deal in the coming months:

The wider economic recovery will be the real determining factor for how the first time buyer market performs this year. First-time buyers need job security if they are to feel confident in taking the plunge in what is one of the biggest financial investments of their lives. It's encouraging to see increased delays and challenges have not dampened prospective buyers home buying dreams; in fact, they appear more motivated than ever after the lockdown experience. It's important as conditions continue to change that new buyers seek expert advice from brokers who will be able to outline options and help ease the confusion of the process that many feel.