Rise in interest rates makes getting onto the property ladder more challenging
Getting onto the property ladder is notoriously tough. For years, it has been challenging to save a deposit and secure a mortgage to buy a first home, but rising interest rates are making it more difficult than ever for first-time buyers to take the plunge. As rates continue to soar, many first-time buyers may be considering if now is the best time to buy a house or flat.
The current situation
Photo by Alena Darmel
Interest rates have risen significantly in the last year. The most recent increase confirmed by the Bank of England saw rates hit 4.5%. While rising rates are good for those who are saving money, they spell trouble for homeowners with flexible mortgage rates and those trying to get onto the ladder. The higher the interest rate, the higher the repayments.
Increasing interest rates is a tactic used to try to counteract high rates of inflation, but it impacts how much people are paying to borrow money to buy a house. It can also affect the availability of mortgages, particularly for first-time buyers. Some people may find that they could borrow more money a year or two years ago than they can now, for example. The affordability of mortgages has also decreased as monthly premiums have shot up.
What can first-time buyers do?
Most people have ambitions to buy a property. Renting is increasingly expensive and it limits what you can do with your home. Purchasing real estate is also an investment. Rather than putting money into another person’s pocket, homeowners put funds into their own assets. It is extremely challenging to get a foot on the ladder at the moment, particularly in areas where affordable housing is in demand, but there are solutions. The first port of call for those who are looking to buy for the first time is to see a mortgage broker for first time buyers. Mortgage brokers and advisers can talk prospective buyers through different types of mortgages, compare offers from different providers and provide information about support schemes or incentives. It’s also beneficial to research online and to consider broadening your search criteria.
When prices are high and properties are flying, it may be advantageous to think outside of the box. Options like expanding the search area, buying in an up-and-coming area rather than an established hot spot and taking on a project can all make first homes more affordable.
Is now the right time to buy?
The cost of buying properties has risen for many prospective buyers. It’s a personal decision but some first-time buyers may wish to wait until interest rates start to fall before taking the leap. There is a degree of uncertainty about the future, but inflation is expected to fall, which should trigger a reduction in interest rates.
It has been difficult to get onto the property ladder for several years, but recent hikes in interest rates and the rising cost of living have made buying a first home more challenging. If you are looking to buy a house or flat, it’s beneficial to keep an eye on mortgage offers and interest rates and seek expert advice. Some people may want to wait for rates to start falling before viewing properties and making offers.