To say it’s been a strange year for the property market is an understatement. The UK housing market was effectively frozen for seven weeks between March and May this year. Although it’s back open now, it’s far from business as usual. As if buying a property isn’t already a turbulent and uncertain rollercoaster ride at times, Covid-19 has added extra considerations into the mix. And for first-time buyers Covid-19 poses both opportunities and challenges.
Here are four things first-time buyers need to consider when buying a home during Covid-19:
1. Making sure you’re still eligible for a mortgage
With considering whether you’re still eligible for a mortgage post Covid-19, first there is a question of whether your personal circumstances have changed. For example if you’ve been affected by furlough or redundancies this could impact your ability to meet lenders’ criteria. (And if this has affected you we wish you the best of luck with getting back to work and/or finding a new job soon.)
Secondly there is the reality that lenders’ appetites certainly seem to have changed. Mortgage expert, Will Rhind from Habito, recently told the Metro that the current market is not favourable to those with a 5% deposit and that lenders are prioritising buyers with deposits of 15-20%. This means that at the moment first-time buyers may need higher deposits to get accepted for a new mortgage application. An alternative is to wait until 5-10% deposit deals return to the market.
Yes some of us might find this an unwelcome delay to our plans which will naturally be frustrating to some first-time buyers who have spent years saving already to get on the property ladder, but hang in there! We can use this time to prepare and build stronger foundations for achieving our goals so we’re (even more) ready when the time comes. I will cover more on how we can do that in point four.
2. Understanding virtual viewings
Nearly 40% of all estate agents are now using online viewings. Virtual viewings use clever spatial mapping technology with which sellers are able to capture a 3D view of their property. It produces a navigable doll’s house view of their home which buyers can then browse. Zoopla says, ‘estate agents' use of [this] technology is proving so popular with would-be buyers... that some are willing to put in an offer to buy or rent a home on the strength of the virtual viewing alone’.
Although buying a house you’ve never set foot in may be a sign of things to come and a regular occurrence in the future, for now I suspect the majority of us will want to see a property in real life before we commit to buying it. That said, clearly virtual viewings have an important role to play in motivating us to consider a property and making it easy to do so during Covid-19 — even if they’ll be unlikely to close the deal for now.
3. Timing, when’s the best time to buy?
A big question facing first-time buyers during Covid-19 is about timing. While some people are anticipating a drop in house prices and asking ‘should we offer less?’; others are reporting that people are paying far over the asking price to secure a property with viewings being tough to get and offers being made (and accepted) on the same day as the house enters the market.
Many important questions are as yet unanswered. After being suppressed for several months has the property market become too fast-moving? Are property prices going to drop and when? Should we wait?
Given we don’t yet know how the situation will turn out, what’s the best thing to do? That will depend very much on your individual situation, but some experts advise it’s best to wait.
4. What can you do to prepare?
When we’re able to accept that some things are out of our control and that they don’t always happen as fast as we’d like them to, we’re better able to be productive — undeterred by stress and anxiety. So even if the Covid situation does cause delays for some of us in pursuing our goal of home ownership, we can use this time productively to make sure we’re in an even stronger position when the time comes.
For instance those who work from home in jobs that are not too badly hit by the crisis have a great opportunity to increase their savings as they will be spending less on nights out and holidays. This could provide a helpful boost to the level of deposit they’re able to pay.
You could also use this time to research what mortgage deals are available to you and to find out more about how the whole process works. Another important thing to do is to make sure your credit score is good. Making sure your credit score is good is really important because it can increase your likelihood of getting accepted for a mortgage as well as saving you £1000s in being able to access better deals. To build your credit score you could try using Loqbox. Loqbox is a free tool that helps you improve your credit score, while you save. You can find out more about how it works here.
In the next post I’ll look at what the stamp duty holiday means for first-time buyers.