Falling prices and low interest rates make a combination which could be starting to tempt buyers back to the market, in particular those who have been waiting to get on to the first rung of the property ladder.

A recent report by HBOS bank, called the Halifax First Time Buyer Affordability Review, suggested that for first-time buyers, property is now more affordable than it has been for nearly four years.

Looking at local authority areas across the country, the review’s findings were based on house prices and average salaries expressed as a ratio.

Perhaps not surprisingly, properties were most affordable in Scotland, Yorkshire and the Humber region, although Waverley in Surrey was picked out as a newly affordable borough in the South-East.

So, in the light of new-found affordability, should first-time buyers be looking to make their move at the current time? Certainly, if you can raise the deposit, it is worth considering with the low interest rates and houses priced to sell.

Add to this the fact that renting is not necessarily more affordable than a mortgage — and is, of course, ‘dead money’ — buying makes good sense.

But to avoid costly mistakes, any first-time buyer should do their homework first. Take a look at what you can get for your money in the areas that interest you and then allow yourself time to consider the features you like and those you don’t.

In addition, by looking at a number of properties, you will get a good idea of what your chosen new home is really worth when you come to make an offer.

However, it can be tempting to rush into buying something just because it’s affordable, so it’s important to remain realistic and practical.

Try to imagine yourself actually living in the property because that dream home might seem to be everything you want, but in reality, for example, would the lack of off-road parking eventually drive you mad?

Paul Phelan of McCarthy Holden advises anyone thinking of buying for the first time to start by spending a few weeks looking around.

“By doing this, when lending does free up, which it might do in a couple of months, you will be in a good position to make a move,” he said.

“At the present time, for first-time buyers, flats are a good option. My advice would be, if you can get a mortgage, buy today. I think flats have more or less hit the bottom and could even start going up in price again in the next few months. If you wait too long, you risk leaving it too late.”

The fact that estate agents are seeing growing numbers of new buyer registrations suggests that perhaps there is a feeling of readiness to move creeping in.

Duncan Pate of Castles says that the company’s offices have seen an increase in activity so far this year.
“I think people are now recognising that life goes on,” he said. “And I think that because estate agents took the responsibility to tell vendors what they needed to be told about prices, we have been able to keep the market going.

“We saw the quickest fall in prices in history and with that has come opportunity, and there is now a decent choice of properties which are good value for money. But, of course, this all rests on being able to get the finances, as lenders are continuing to be cautious.”

And there’s the rub. Raising the money to buy your first home still is no easy task, particularly as saving for a deposit has become harder thanks to low interest rates.

Consequently, it pays to go into the options before embarking on the purchasing journey. These might include considering part rent/part buy schemes or equity sharing.

“Part rent is a good way to get on the property ladder if you’re finding it difficult,” continued Mr Phelan. “As is shared equity, although if you go for this, make sure you look at the small print because some deals are better than others.

“As with everything, do your homework and don’t just be lured in — check that you’re paying a realistic price.”

Arranging your mortgage in advance of your search and obtaining a Mortgage Agreement in Principle is also an excellent way to give peace of mind to yourself and to your seller that the money is there and waiting.

With all this in mind, Michael Usher of Michael Usher Mortgage Services says in the first instance it is important to get sound advice from an independent financial adviser.

“At the moment, things can change very quickly, so keep an eye on the market because there will be some better lending opportunities in the next few months,” he said.

“I think the base rate will stay low for the rest of the year, so it could be a good idea to get a low fixed rate mortgage for two or three years.

“At the moment, lenders are not lending to low deposit borrowers because house prices are still falling, which means that the value of their loan in relation to that of the property is not so certain.

“But something has got to give and already there are one or two mortgages about with an interest rate of 4.9% against a 15% deposit.

“All we need is for one brave lender to start lending to low deposit borrowers and then the rest will be forced to follow.”

Commenting on the latest announcement from the government that it will offer state insurance for banks in an effort to shore them up and encourage lending to businesses and individuals,
Mr Usher continued: “The government’s recent decision to act positively is a welcome move.

“The intention to buy up bad assets and guarantee others forms a large part of these sweeping measures. Hopefully, a more balanced approach, with cushioning from the peaks and troughs we’ve seen lately, will bring confidence back to lending.

“It may take some time before we see these measures improve opportunities and offerings for first-time buyers, but they should filter through eventually.”

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