Buying a home is an investment in your future – but when you do it for the first time, it can feel really daunting. Considering the doom and gloom we hear every day on the news, it may seem particularly risky to take that next step. That’s why we asked Censeo Financial, our recommended Independent Mortgage Advisor, their thoughts on the benefits of buying a home right now, rather than waiting.
A blog by Censeo Financial
Benefits of buying vs renting
Homeownership is a dream of many in the UK, as the value of a home is seen as an investment for the future. However, the latest analysis from Rightmove reveals that first time buyer asking prices and average rents for equivalent properties have risen three times faster over the course of the pandemic compared to the years preceding it. This has had a big impact on those attempting to get their first foot on the property ladder. With annual rental growth being the highest its been since at least 2011, saving for a deposit has never been so challenging.
So given the current climate, is it better to rent or buy in London? Renting might work for those who are starting a career or moving to a new location for work as it gives them flexibility; however, many landlords are now requiring longer tenancies. A rental property also comes with some uncertainty – renters move more frequently due to landlords selling their properties or raising rent without warning.
In comparison, buying a home allows for more stability. Buyers can put down roots in one place and have the added freedom of decorating as they’d like to make the home their own. If buyers take out a fixed rate mortgage, there is also more certainty on monthly home payments in the years following the purchase.
Moneyfacts also reported in June 2022 that average mortgage product fees have fallen over the past year, and the number of fee-free options on the market has increased by 80% during the same period. This makes homeownership more possible, even with rising house prices.
Intermediate homeownership options like Pocket help first time buyers get onto the property ladder. At Censeo, we talk to many lenders looking to offer mortgages for affordable homeownership properties.
The resilience of the London property market
Despite recent talk of the property bubble bursting, house prices are continuing to rise. The average UK house price hit £354,564 in March 2022, pushing the annual rate of increase to 10%.
The UK property market put in another resilient performance in June, with house price growth remaining in double figures despite consumer confidence falling to a record low in the face of 40-year-high inflation. With supply rebuilding more gradually than anticipated, house price growth is expected to end the year on a high, according to estate agent Knight Frank.
The latest market analysis from GetAgent.co.uk found that across England, buyer demand is currently at 63%, remaining largely unchanged when compared to the first quarter of this year. Demand across London increased by 7% between the first and second quarter of this year, the largest quarterly increase of all areas of England, despite many people leaving the capital during the pandemic.
With major transport projects such as the Northern Line extension to Battersea, the launch of the Elizabeth Line and the opening of Barking Riverside on the London Overground, many areas of London have seen a surge in demand and significant rises in both rents and property values. The capital is showing significant growth and recovery, and many of those who left during the pandemic are returning to the buzz of the city.
It’s still a good time to buy
A property is usually a long-term investment, as the forces of supply and demand keep prices roughly in balance. Despite inflation, the Bank of England base rate and mortgage rates are all rising, and with the cost of living tightening our budgets, the property market remains strong as demand is outstripping supply. Mortgage rates are still a lot lower than they were in 1981 when they reached 16.63%, and no commentators predict rates rising anywhere near this figure. The trend for longer fixed rate mortgages also safeguards any future rate rises in the next few years.
First time buyer interest to buy was up in May, according to a survey by Twenty7Tec. Searches for mortgages suitable for first time buyers made up 19.4% of all mortgage searches that month. Clearly many are taking the decision to buy.
Buying a home gives certainty, and a more affordable homeownership option like Pocket Living’s offering allows this with a smaller deposit and often at the same or lower monthly costs than a rental commitment. At Censeo, we specialise in the affordable homeownership market and can provide support, advice and guidance on the right mortgage for first time buyers’ personal needs.
Advantages of buying a new build
Buying a new home like those provided by Pocket Living appeals to many – the property is brand new, modern and well designed, often incorporating the latest home interior trends. Being the first homeowner, along with many others in the development, allows all new residents to build relationships and create a community.
Energy costs persist in rising as the cost-of-living crisis continues, and this especially has an impact on those living in older properties. Therefore, many are looking at how they can make their homes more efficient, but this comes at a cost. New build properties come with the latest technology and materials that make homes energy efficient, which keeps energy costs lower.
Many lenders now offer green mortgages, and some take the energy efficiency of the home into consideration when assessing a purchaser’s affordability. The Leeds Building Society, for example, has just introduced an improved affordability assessment for those who buy a green and EPC A or B rated home, with the opportunity to borrow more due to the lower energy costs for buyers.
The benefits of buying a home right now are plentiful despite the challenges first time buyers are facing. Like Pocket Living, we want to support hopeful Londoners make their dreams of homeownership a reality. It’s not impossible, and in fact, it can be a life changing decision.