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It might be difficult to fathom, particularly during times of higher interest rates on mortgages and property price weakening, but in every property market there is opportunity.  The number one rule for any first-home buyers is that today is always the best day to enter the property market as long as you stick by two hard and fast rules. 

Don’t buy on impulse or emotion, and always borrow conservatively only considering current income and potentially higher interest rates.  It is no good to be borrowing to your limits with no room to move, interest rates fluctuate more than real wages.

There are always advantages and disadvantages whenever buying into the property market.  Look at the current market in the UK as an example.  This is a market that has suddenly turning from a seller’s market into a buyer’s market as financial pressure increases on mortgagees and housing prices tumble.   The number of houses on the market is increasing while the pool of buyers is diminishing.

This is the best time for a first-time homebuyer to entry the market. For the past few years affordably for first-time homebuyers had declined to the point where many looking to buy a property were squeezed out becoming caught in a rental trap. With the recent fall in housing prices this situation is turning around. 

According to the property research group Hometrack 28.3 per cent of working households are priced out of the property market.  This has been a trend as low interest rates have pushed up prices out of the reach of most first-home buyers. 

Hometrack’s director of research Richard Donnell said while the supply and demand formula in the UK was likely to keep first-home buyers out of the market in the near term, there was the potential that falling prices would produce a window of opportunity.

“Until such time as mortgage rates start to fall then lower house prices will be the only real driver of improved affordability for first time buyers,” Mr Donnell said.

“Twenty per cent of those currently priced out of the market would be priced back in by a 10 per cent fall in house prices,” he said.    

But the current property market is a double-edged sword for first-home buyers.   On the one hand property prices are starting to fall giving more first-home buyers their first chance of finding affordable houses, but tightening credit markets are forcing lenders to enforce stricter lending rules. 

These new rules are directly impacting first time home buyers.  A borrower with a strong credit history, large deposit or assets as security is a lesser risk than someone looking for their first home, with little or no deposit.

In fact, many lenders are withdrawing their 100 per cent mortgages for first-home buyers, requiring customers to have a substantial deposit before even considering them for a loan.  These new rules will improve the health of the credit market over the medium to long term, but they are affecting people who seek entry into the property markets.  Many lenders are asking for deposits up to 20 per cent before considering a loan.

First-home buyers are also facing another hit from raising rent as the gap between buying and renting narrows.  For a long time renting was a better option, with the cost of renting being 65 per cent of the cost of purchasing a home according to Hometrack. However the gap is narrowing after a rapid increase in rental prices.

Mr Donnell said that renting has been a cheaper option for a long time.

“However rental affordability is likely to worsen in the coming months on the back of rising rents which are up by as much as 20 per cent in some markets over the last year.”

What this analysis of the market shows is that there are advantages and disadvantages in entering the market anytime.  It is not left to luck when purchasing a house for the first time.  A buyer needs to analyze the fundamental, develop a strong understanding of the property market they are entering, and plan for the challenge of owning property.  Also they should shop around when looking for the best value first-home mortgage, it is the biggest investment most people will make. 

When a first-home buyer sticks to the number one rule of the property market they form a strong base for success and growth in the market.  

Tags: mortgages for first-home buyers | mortgages for first-home buyers | best value first-home mortgage | best value first-home mortgage | mfirst time home buyers | mfirst time home buyers | first-home buyers

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This entry was posted on Tuesday, August 19th, 2008 at 1:41 pm and is filed under Realtor brokers. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.