Should first time buyers get on the ladder in 2023?

Should first time buyers get on the ladder in 2023?
13th February 2023

Taking your first step onto the property ladder is always a big move, but with current high inflation and mortgage interest rates rising, you might be especially concerned about buying in 2023. Is a home still within your financial reach and, if so, what are the initial steps you should be taking now?

The first thing you’re probably wondering about is whether you’ll be able to afford a mortgage. After last autumn’s disastrous mini budget, the market did have a hiccup, with many products being withdrawn by lenders and headlines broadcasting that rates were over 6% and buyers were having mortgage offers pulled.

But, as is so often the case, it was the most extreme scenarios that hit the news and once Rishi Sunak took over as Prime Minister the markets settled. The reality was that although some fixed rates did tip over the 6% mark, variable rates were still available at well below that. Now that we’re a few months down the line, lenders are starting to compete for business again – after all, lending money is how they make their profits – and competition tends to bring rates down. Currently, our mortgage partners at Mortgage Scout have discounted first time buyer rates at 3.44%, which should be affordable for most first time buyers.

You may also be wondering how much prices have risen in the last few years and what’s likely to happen in the near future. Well, although average prices in most areas did increase by double-digit percentages during the pandemic, it’s important to remember that national averages don’t apply in every area and to every type of property. For instance, flats generally haven’t seen the same kind of price inflation as houses, which means they’ve remained more affordable and you’re getting more accommodation for your money – great news for you as a first time buyer.

And while price growth is slowing at the moment, capital values are expected to recover well over the next five years and the market certainly isn’t expected to crash as it did in 2008. So, as long as you take good advice about what to buy from agents that understand the local market, you shouldn’t need to worry about your new home losing value.

Your first 3 steps to buying your first home

  1. Establish your deposit and start to budget

Look at how much you have in savings currently and how much more you think you could save before buying - and if you’re just starting to save, make sure you take advantage of the government’s Lifetime ISA. If you’re between 18 and 40, you can put up to £4,000 a year into the savings account and the government will add 25%. So, if you save the full £4,000 in a year, it will be topped up to £5,000. 

And then think about how much you could comfortably afford to repay on a mortgage, based on your earnings and the outgoings you’re likely to have once you’ve got your own home. If you don’t already keep track of your income and expenditure, now’s the time to start putting together a budget.

  1. Speak to a mortgage broker

Even if you’re not planning to buy for a while, it’s never too early to speak to a broker to find out about lending criteria and get an idea of how much you might be able to borrow. For instance, you need to be aware of how your employment status, type of job and how you’re paid could affect a lender’s decision, as well as the impact any other debts might have on your borrowing.

A good broker can also run through all the costs associated with buying, help you with budgeting and offer advice on any steps you could take to improve the likelihood of a particular type or level of mortgage being approved.

  1. Look at what and where you can afford to buy

Once a broker has given you an idea of how much you can afford to pay, it’s time to start looking at your property options. Of course, you want the best home you can get, but it’s important to remember that this is just a first step and it’s about buying something that will enable you to build up equity so you can move up the ladder in a few years.

So be prepared to compromise – whether that’s looking at smaller properties than you’d hoped, or areas that are a little further away from work and family - because you’re highly unlikely to get everything you want. Decide on your priorities and then talk through your needs with an expert agent who can advise you on what might make a good first purchase.

Above all, take your time and make sure you don’t rush into buying. If you’d like to talk through the process, just contact your local branch and one of our team will be happy to have a chat and can show you some potentially suitable properties currently available in the area.

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