According to many experts, it’s a good time to be a first-time buyer in London. Average house prices are falling across the capital, sales are down, and mortgage costs are low. Changes to Buy to Let rules also mean that many landlords have withdrawn from the market, reducing the competition for homes.
In addition, buying costs are also lower thanks to the government removing Stamp Duty for first-time buyers paying less than £300,000 and reducing the tax charge for others.
So, what do price falls mean for first-time buyers? Is it now cheaper to buy than rent? And what should you consider if you’re thinking of buying your first home in London?
London house prices fall at fastest rate for a decade
Recent figures from the Office for National Statistics and the Land Registry showed that house prices in London saw a fall of 3.8 per cent in the year to February – faster than a 2.2 per cent decline recorded in January, and the worst performance in a decade.
February was the 12th consecutive month where prices have fallen or flatlined in the capital, and prices are falling in all but nine of London’s 33 local authority areas. The latest house price index from Your Move shows that there are strong price variations across London, with prices falling faster in some boroughs than others.
Five boroughs where house prices are falling…
- Tower Hamlets (-11.3%)
- Greenwich (-7.8%)
- Newham (-5.9%)
- Ealing (-5.4%)
- Enfield (-2.6%)
…and five where they are rising
- Merton (+7%)
- Redbridge (+4.4%)
- Lewisham (+3.6%)
- Lambeth (+2.8%)
- Bexley (+1.2%)
“An unsettled market is normally a good thing for first-time buyers, and prices have definitely softened in London,” says Paul Cosgrove, Director at estate agent Finlay Brewer.
“First-time buyers have the opportunity to jump into a more central location than they might have thought previously.”
The latest Zoopla index also revealed that the number of sales in London has also fallen in the last four years. Sales of homes in the capital have fallen by 20% since 2015, while sales across cities in southern England fell by 13%.
Buying in London £3,500 cheaper a year than renting
Rising rents and falls in house prices in London mean that buying a property in the capital is now cheaper than renting.
Santander compared the cost of an average 25-year mortgage at 2.48% interest in London (assuming a 76% loan-to-value) against the cost of renting in the capital.
The bank found that mortgage holders paid an average of £289 less than renters, equivalent to an annual saving of almost £3,500.
Miguel Sard, Managing Director of Mortgages at Santander UK, said: “Of course, buying a property is a major financial investment with up-front costs to consider, but long term the financial benefits can be significant.
“With annual savings averaging well over £2,000, this can really mount up over time and, of course, once the mortgage is paid off, you have a valuable asset to show for it.”
Factors to consider when buying in London
Get your mortgage sorted
Competition for properties in the capital can be fierce, so ensuring you have your mortgage prepared and ready to go can put you in a great position when you come to make an offer.
We can help find the right lender and the right mortgage deal for you. With wide experience helping first-time buyers across London, we’re experts in helping new buyers onto the property ladder.
We can get your mortgage agreed in principle. This means you can move quickly when your offer is accepted and you have a contract exchange deadline.
Consider the government schemes
Schemes such as Help to Buy London are designed to support first-time buyers. Under this scheme, you can apply for an equity loan of up to 40% of the purchase price. You must put down a deposit of at least 5%, but it means that you can access cheaper loan-to-value mortgages which should offer lower repayments.
Your equity loan is interest free for the first five years and after that you’ll pay an admin fee starting at 1.75% of the loan.
We have a wide knowledge of the various government schemes available and we can help you find the right deal for you.
Future-proof your choice
When you’re looking for a property to buy, it can pay to think not just about how it suits you now, but whether it will be right for you in the future.
For example, are there good schools nearby if you plan to start a family? And what about the transport links? Your new home may be close to your current place of work, but if you change jobs will you still be able to reach your workplace easily?
Negotiate the price
In an environment of falling prices, it’s important that you don’t overpay for your property. With volatility and uncertainty in the market, there can be a gap between the expectations of vendors and what you’re prepared to pay.
Don’t be afraid to haggle when you put in an offer and to negotiate hard on the price.
If you’re a first-time buyer, you’re moving home, or you want to remortgage, we can help. We’re mortgage experts, so get in touch with us today for advice. Email firstname.lastname@example.org or call (0207) 808 4120 to find out more.