Product withdrawals and higher rates leave new buyers vulnerable
First-time buyers are the homebuying group most exposed to current volatility in the mortgage market, with new figures from home-mover comparison site reallymoving showing that most rely on borrowing to complete a purchase.
Over the past six months, 90.5% of first-time buyers in the UK used a mortgage to fund their purchase, rising to 92.6% in March — the highest level since October 2013 — as buyers sought to secure deals amid rising rates and product withdrawals.
Reliance remained above 90% in every region except the North East (87.7%), Wales (88.5%) and Yorkshire & Humber (89.8%).
The data suggests that first-time buyers’ dependence on borrowing increases their exposure to sudden changes in pricing and availability. Reliance on mortgage finance was also high among other buyer types, with 87% of upsizers and 82.1% of investors using a loan. Among downsizers, 40.5% still used mortgage finance.
Source: reallymoving
According to Moneyfacts, about 1,500 mortgage products have been withdrawn since the start of the conflict in the Middle East. At the same time, borrowing costs have increased to their highest level in more than a year, with deals priced below 4% becoming less common.
London appeared to be the most mortgage-dependent part of the UK, with 87.4% of transactions in the capital relying on a loan. The North East had the lowest mortgage dependency, at 77.3%, underlining regional differences in sensitivity to rate rises and product removals.
First-time buyers also made up 63% of all buyers in London, the highest share of any UK region, which could leave the capital’s market more reactive to shifts in lender appetite and pricing.
Source: reallymoving
“Expectations that borrowing would become cheaper this year have been turned on their head,” said Rob Houghton (pictured right), founder and chief executive of reallymoving. “Inflation, which was unchanged in February at 3%, is now on course to shoot back up, and as a result, we’re likely to see the base rate rise this year rather than fall. Lenders are spooked and amid the uncertainty, we’re seeing hundreds of products being pulled, with rates rising across the board.
“Anyone hoping to buy this year will be concerned, particularly first-time buyers who are most heavily dependent on mortgages, and existing homeowners with deals due to expire in the next few months. The focus will be on securing a deal as quickly as possible before costs rise further, and for those buyers with a mortgage offer in place, the rush is on to find a property and exchange before it expires.”
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