First time buyers - how long should you wait?

Leading UK property search website FindaProperty.com notes that with affordability increasing, prices falling, and interest rates at an all-time low, a number of factors are coming into play that mean first-time buyers should seriously consider making their first property purchase in 2009.

Michael O’Flynn, Content Editor at FindaProperty.com comments: “The current market is still a difficult one for first-time buyers, but conditions are improving. If you have a deposit now could be a good time to buy. Prices have fallen by over 16% year-on-year, interest rates are low, mortgage lenders are beginning to ease up and sellers are keen to do a deal. This set of circumstances won't last forever – there is a growing consensus that the market will bottom out in the second half of 2008 – so buyers sitting on the sidelines should start think seriously about making a move: it’s always better to buy close to the bottom than end up on the wrong side of the recovery."

Ten reasons for first time buyers to be cheerful in 2009:

1. Prices are falling within reach – they are down £35,000 on average since their high point in Oct 2007.

2. Lenders are beginning to loosen up - more are now offering Loan to Value ratios at 80-90 per cent.

3. Affordability has improved significantly and is now roughly in line with the long-term average.

4. You'll get poor returns on savings at the moment, so your deposit isn't likely to grow significantly.

5. Interest rates are at an all-time low - and mortgage rates, already historically low, are edging down too.

6. Buyers are relatively thin on the ground so there is less competition out there. Vendors are also keen to do a deal – there is an average of 12 per cent currently being haggled off asking prices.

7. There is a growing consensus that prices are beginning to bottom out, with this expected to happen in H2 2009. Therefore, the window of opportunity is narrowing.

8. Market activity could pick up (albeit modestly) if mortgage backed securities free up lending, in a scheme that will be launched in April.

9. The increase of the stamp duty threshold to £175,000 has cut the cost of entry to the market.

10. It is better to buy before the bottom than end up on the wrong side of a rising market – and things could pick up quite quickly as falling prices and increased lending draw in more buyers.

How can first time buyers take advantage of the potential opportunities that lie ahead? FindaProperty.com has come to the rescue of the confused first timer with a set of practical hints and tips, exploring the options.

FindaProperty.com’s top tips for making a first time property purchase in the current market:

Use government shared ownership schemes
You might not think that you are eligible, but many of the Government's Open Market HomeBuy schemes are open to households with an income of up to £60,000 per year, not just key workers. These schemes allow you to buy a percentage of a property on the open market with a loan from a shared equity lender.

Save a healthy deposit
Due to tighter lending criteria, lenders now refuse to lend unless an application is accompanied by a good credit history and a minimum 25% deposit. However, once you have your deposit together and finally come to the point of obtaining mortgage finance, many lenders have products designed specifically for first time buyers, such as mortgages where your parents act as a guarantor. However, it is also worth noting that due to low interest rates, saving up a large deposit has become more difficult.

Take advantage of your chain-free status
As a first time buyer, you will also have more bargaining power because you don't have a home to sell (i.e. no chain) and can move quickly, as well as having the ability to haggle over asking prices.

Buy from a new build developer
New build developers are not tied into chains, will be able to do deals such as paying your deposit for you, and are motivated sellers, due to the need to meet sales targets. FindaProperty.com’s sister site Findanewhome.com will be able to flag up such deals to buyers as they browse their selected properties.

Get your timing right to avoid negative equity
Negative equity occurs when your property’s value falls and your home is worth less than the amount that you owe on your mortgage. This is more likely to happen when you take out a mortgage with a high loan-to-value ratio, or an interest-only mortgage. The best advice is to try not to stretch yourself too much with the repayment plan you set out, and to budget for fluctuations in mortgage costs.

Get help from your family and friends
Finally, the best way for your parents to help out is with a deposit; however they can also help in many other ways, such as taking out a mortgage jointly with you, or acting as a guarantor on your mortgage. You could always buy jointly with friends, which will allow you to share the cost.

Michael O’Flynn comments: “The current market is still a difficult one for first time buyers, but conditions are improving. They will have to, because without first time buyers, the rest of the market cannot function – as we are currently seeing. Market conditions however dictate that things can only be expected to improve for first time buyers.”