Is 2021 a good year for first-time buyers?

Since the outbreak of the Covid-19 pandemic in March 2020, homebuyers have been receiving conflicting information on the housing market, making it difficult for first-time buyers to decide whether now is the right time to buy. Let’s take a look at some of the reasons to buy this year.

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Stamp duty

In May 2020, the Bank of England was so alarmed about the potential impact of the virus that it predicted there could be a 16 per cent fall in property prices. The government was so spooked that it introduced a stamp duty holiday two months later, setting a threshold of £500,000.

The government has extended the stamp duty holiday, which was due to end earlier this year, until the end of September, although at a reduced threshold of £250,000. The rate will return to pre-Covid levels from 1 October.

Average price

The fall in house prices didn’t materialise, and the figures over the past six months suggest that the market may have been over-heating.

The July 2021 Halifax House Price Index showed that annual house price index inflation stood at 8.8 per cent. Although this was slightly down on the previous month, it still showed that the average price of £260,358 was £21,000 higher than last year.

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Should potential buyers be concerned, or is this a good time to look for a new property? The Halifax report suggests there may have been a levelling-off of price inflation; however, the market is so volatile that buyers should not rely on this.

Mortgage rates

Mortgage rates continue to be very low, so now might be a good time to get an offer agreed in principle.

Mortgage guarantee scheme

If you can afford a five per cent deposit, you can take advantage of the government mortgage guarantee scheme launched in April. Under the scheme, the government offers the lender a guarantee on the portion of the loan over 80 per cent in case you default on payments, encouraging a range of lenders to provide what would be considered riskier mortgages.

Conveyancing

Another outgoing associated with house purchases is conveyancing costs; however, in a busy market, these can be more competitive. You will need to obtain some quotes to compare and can find lots of information on conveyancing costs online.

It is also worth bearing in mind that the furlough scheme is due to end in September, which may have an impact on redundancies and on some people’s ability to pay mortgages. Many people are hoping for a bargain when the furlough period ends, but there is no guarantee that prices will fall.

If you can afford to buy now, 20201 is as good a time as ever.

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