First time buyers are frozen out of housing market and will wait

We’re going nowhere! First time buyers say they are frozen out of housing market and will wait to get on property ladder as house prices are set to fall £26,550 in a year after Jeremy Hunt’s Autumn statement

  • Office for Budget Responsibility: average house price will be £268,450 by 2024 
  • Declining property values will be largely driven by much higher mortgage rates
  • Permanent stamp duty cut announced in mini Budget will only remain until 2025
  • Typical mortgage rates will rise from 3 per cent to 5 per cent by the end of 2024
  • *Have you also been discouraged? Contact [email protected]

First time buyers have said that they are frozen out of the housing market and will now wait to get on the property ladder as house prices are set to fall £26,550 in a year after Jeremy Hunt’s Autumn statement.

According to the latest predictions from the Office for Budget Responsibility (OBR), property values will drop 9 per cent by the third quarter of 2024, largely driven by ‘significantly higher mortgage rates as well as the wider economic downturn’.

That would bring the average home price to around £268,450, wiping out price increases in the last 12 months.

Permanent stamp duty cuts announced in September’s ‘mini’ Budget will only remain in place until March 2025. 

Juliet Cooper, 24, and Tom Wallace, 30, had their eyes on a new build but have now decided to wait a year before stepping onto the property ladder.

After hearing the prediction that the average house could decrease in value, they are hoping that they will be able to make their cash go further by delaying.

The retail manager, who earns a £25,000 salary, lives with her boyfriend Tom, an asbestos remover, in his sister’s home. 

The pair are budgeting £250,000 for their dream home while paying £860 per month in rent.

The duo say that waiting an extra year will enable them to save a further £5,000 for their deposit.

Juliet Cooper (above), 24, and Tom Wallace, 30, had their eyes on a new build but have now decided to wait a year before stepping onto the property ladder

First time buyer and restaurant manager Iryna Charis (pictured), 40, decided to remain in her two-bed flat in south London as property prices could shrink by 9 per cent in 2024

The OBR has said that house prices will fall 9 per cent next year before rising again into 2026 and beyond

Juliet, of Thurleigh, Bedfordshire, said: ‘My partner and I were looking to buy a new build in our village but we’re going to wait now that the prices are due to drop.

‘It just makes sense. We’ll stay at Tom’s sister’s house for the time being and try to save as much money as we can.

‘I’m relieved that house prices are set to drop. The homes in our area are so expensive which makes it difficult to find a decent sized house.

‘Due to the cost of living crisis, everything is going up which meant it was harder to save so a reduced price will ease the burden.

‘The drop will also cancel out the increase in council tax. It should balance everything out.

‘We’re quite lucky as we split all the bills between the three of us so the energy hike hasn’t been too bad but it all adds up.

‘I don’t see the point in buying an expensive home now when we could get the exact same property for much less a year later.

‘The potential of a home dropping up to £24,000 is massive and this could make getting on the property ladder easier.

‘We could even get a bigger home in a nicer area for the same price as we are budgeting for now.

‘The anticipated drop also gives us more time to search for a house and research different areas as at the moment, homes go very quickly.’

First time buyer and restaurant manager Iryna Charis, 40, decided to remain in her two-bed flat in south London.

Miss Charis, who is originally from Ukraine and earns £50,000 a year, bought the property for £610,000 last year as part of a shared ownership. 

First time buyer Mike Kelly (pictured) is continuing to delay his purchase, a decision he made in the wake of the Autumn statement

She owns 25 per cent of the flat, paying rent on top of a £480 mortgage fixed at 1.9 per cent.

She said: ‘I need to remortgage my property soon and it is quite a big difference.

‘I am on a fixed rate for two years and it ends in May… I am worried but I am hoping by May, things will have settled down.’

First time buyer Mike Kelly is continuing to delay his purchase, a decision he made in the wake of the Autumn statement. 

He said: ‘We were all watching to see what the Chancellor said yesterday but, in all honesty, I was pretty disappointed. 

‘There are major macro challenges like inflation but I thought he’d do something to help first time buyers like me to feel confident in buying.

‘Just last week, the Help to Buy scheme ended and that was a big lifeline for many first time buyers. 

‘There are other routes, like Shared Ownership, out there but lots of professionals here in London don’t qualify. It needs to be reformed to help us. 

‘I also know a friend who had a flat pulled two weeks before exchange because the owners were so worried about the market, that’s really unsettling our confidence that even if we were to try and get somewhere it’d fall through.

‘The drop in house prices that’s been predicted is potentially good news but we’ve already had to cut what we save to cover rent and rising bills so I’m not sure it’ll really help us overall.’

House prices are expected to fall £26,550 by summer 2024 according to latest predictions from the Office for Budget Responsibility. (Stock image)

Chancellor Jeremy Hunt said: ‘The OBR expects housing activity to slow over the next two years, so the stamp duty cuts announced in the mini-budget will remain in place but only until March 31, 2025.

‘After that, I will sunset the measure, creating an incentive to support the housing market and all the jobs associated with it by boosting transactions during the period the economy most needs it.’

On September 23, 2022, the Government increased the threshold from which stamp duty was paid from £125,000 to £250,000 for all residential properties purchased in England and Northern Ireland. 

For first-time buyers, the threshold was increased from £300,000 to £425,000.

Those purchasing their first home could also claim tax relief on properties up to £625,000, up from £500,000 previously. All of these changes will be reversed.

Paul Johnson, director of the Institute for Fiscal Studies, said: ‘The cuts to stamp duty announced in the mini-budget will be abolished… about the only good policy in that event.’

The OBR also predicted mortgage rates typically paid by homeowners will rise from 3 per cent now to 5 per cent by the end of 2024, the highest level since 2008.

That is 1.8 percentage points above its March forecast.

More than four in five mortgage deals are currently fixed. The Bank of England says two million mortgage holders will come to the end of their fixed-rate deal in 2023.

The OBR also predicted mortgage rates typically paid by homeowners will rise from 3 per cent now to 5 per cent by the end of 2024, the highest level since 2008 

Home loan rates are expected to still be 4.6 per cent by 2028, suggesting the era of historic rock-bottom deals is over.

That comes despite some rate cuts from major lenders in recent days. 

David Hollingsworth, broker at London and Country, said: ‘Much has happened since March.

‘Base rate expectations are falling back after the spike in the mini-budget and we are starting to see that feed through into mortgage rates.

‘Some five year rates have come back below 5 per cent and we will potentially see more momentum there.’

The average property is now worth £295,000, according to Office for National Statistics data released earlier in the week.

The ONS says house prices rose £26,000 in the year to September, meaning OBR’s forecasted drop would wipe out all growth.

Andrew Montlake, managing director at broker Coreco, said: ‘After property prices boiled over, what we’re seeing now is the pandemic froth coming off.

‘During the last stamp duty cut low supply and high demand lead to the increase in house prices. All of that is going to ease back off.’

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