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Whether you are buying your first, second or even third house. There is nothing quite as exciting as putting your key in the lock for the first time. All those months of planning and that flat, apartment or house is finally yours. You can now begin setting up your home, whether it be your first or your forever home but how has covid-19 affected house prices? Is now the right time or should you wait?

How Covid-19 Could Affect House Prices?

The last few years, the housing market has been booming, with many amazing deals to be had, however coronavirus hit the world and suddenly house viewings couldn’t be conducted and the only way to view a house was virtually but this hasn’t seemed to halted the housing marketing with Which reporting that sales have increased by 24% since last July.

However, it is predicted that house prices are likely to fall between 2% and 5% by the end of 2021 which is understandable given the current economy but there are still good deals. Since the COVID-19 began, the number of mortgage deals on the market has halved, with buyers being asked for larger deposits and those with only 5-10% deposits finding that most of the good deals have been withdrawn. This appears to be a temporary measure with some relaunching products in recent months.

According to The Evening Standard, first time buyers are the group most affected by the pandemic, with no equity in their current homes they are being asked for eye-watering amounts as a down payment. Especially in the more expensive parts of the UK. With lenders no longer willing to offer mortgages to those with less than a 15 percent deposit.

Let’s find a little optimism here, it can’t all be doom and gloom! There are still mortgages being offered, some extremely good deals. It’s all based on affordability. With furlough extensions looming, is the time to move now or save a little bit more?

House Affordability

There are lots of inspirational posts (we will call them that) about 18 year olds buying their first property and having us believe that they did it all on there own to find at the end of the article the bank of Mum and Dad helped a considerable amount. Now, I’m not saying that’s a bad thing. If it’s inspirational that’s great but some of them are misleading when trying to sell that you can buy a house on £15k a year as a single person. Believe me I’ve looked and different parts of the UK are always going to be more affordable than others.

Realtor suggesting mortgage for buying apartment
Photo by Gabby K from Pexels

We bought our first house at 22 (16 years ago) and things were very different then. Neither of us earned over £20k a year and our house cost £130k in the South East of England and we had a mixture of savings, £5k inheritance and £35k deposit loan from the local council called the Open market home buy scheme. The idea was to offer those renting in housing association homes the opportunity to buy on the open market to free up their housing rather than purchasing the house they were renting. We were renting privately back then but we met the criteria. This scheme ended when the government released their new versions offering 5% deposits etc. They all have their drawbacks but that is for another post.

Obviously, mortgages changed after the financial crisis when banks were offering loans as deposits (Northern Rock may spring to mind) 95% and 100% mortgages were actually readily available and not just from a broker.

I guess, what I’m trying to say is THERE ARE OPTIONS! According to The ONS the average house price in the UK is £256,000 (July 2020). With this figure. You would need a joint income of £45k a year and a deposit of £55k. It doesn’t seem really fair does it? Especially when your grandparents properly tell you they bought their first house for £6k!

So, you can either move to a cheaper area, look for cheaper properties, flats, small houses, ex-council or army, look at auctions, consider a property that needs work (not for the faint hearted), save longer or consider a buying scheme. All of which are extremely good options.

Buying Schemes

The government currently offer a help to buy equity loan and shared ownership. Most other schemes have now ended and I believe from April 2021, these schemes may only be available to first time buyers (please don’t quote me on that) however this might change given the pandemic. There are other schemes offered by housing associations and sometimes local councils. They are worth investigating, like cheap rent while you save a deposit for example.

Tired couple sitting on car luggage boot
Photo by Karolina Grabowska from Pexels

However, Forbes suggest that more and more of these schemes are going to be taken up given that unless property prices fall by 37%, home ownership will be unaffordable for most single people with an average income.

Now, before you decide you’ve had enough and to throw all your deposit away on a holiday to Bali. Once things settle down, you may actually find yourself in a better place and house prices might be more affordable.

Using a Mortgage Calculator

When considering buying for the first time, moving or purchasing a property for investment you may want to consider your affordability and whether you can afford the new mortgage or increase to your monthly outgoings.

I don’t know about you but I find mortgage calculators like Mortgage Calculators.info are necessary when buying a home as there is so much to consider and understand. What exactly are you paying for? What’s the difference between a two-year fixed rate and a ten-year fixed rate? What are the lifetime costs involved? Will you be charged if you need to exit your mortgage early? And can you afford the house you want to purchase? A mortgage calculator can help you estimate your monthly payments, deposit, interest rate and if any other fees apply.

Calculator and notepad placed on USA dollars stack
Photo by Karolina Grabowska from Pexels

Calculate Mortgage Payments Using a Calculator

There are some extremely complicated mortgage calculators out there but I was impressed with how simple mortgagecalculators.info was to use. Originally for the US real estate market, they have recently branched out into the UK and I was impressed with how simple their website was to navigate. It’s all on one page and when I wanted to find the monthly repayment for a £400k property it told me interest only and repayment costs with just a few simple steps, which was amazing. No having to fill in all my details, income or shoe size (it does feel like that sometimes). I have included what the monthly payment details below.

The good thing as well is that, they offer some pretty great advice about applying for mortgages, where to go for advice and further steps to assist you. There are also a great deal of other calculators to choose from including if you wanted to make mortgage overpayments, which I haven’t really seen often. This can be a great help, if you want to pay off your mortgage early or increase your equity.

If like me you often find yourself scrolling daydreaming through sites like Zoopla and Right Move dreaming of your next dream project then it can help you work towards those goals because you may have to wait a little longer than you planned.

Should You Wait To Buy

If you can afford to, don’t wait! Purchasing your first home is a big decision and one that you’ve probably saving years for. We got caught by the financial crisis of 2007-2008, we lost equity and a restriction on pay rises meant it would take us six years to be able to afford to move.

I’m not saying post-covid will see a huge drop in house prices but it maybe worth considering that the best deals may be available now.

The Future of Home Buying Post Covid-19

The Guardian wrote back in October 2020, that with so many buyers losing their jobs more so when furlough officially ends. This could have a huge impact on the property market and house prices with lenders continuing to be conscious and uncertain about how this year will fair after the stamp duty scheme ends. It warned that they wouldn’t be surprised if prices dropped sharply after activity slowed across the country within the next year or two.

Cheerful couple taking selfie near carton boxes
Photo by Ketut Subiyanto from Pexels

Mortgage Guarantee Scheme

This scheme is nothing new, it’s just the governments way of keeping the housing marketing moving, by taking on some of the risk. However, it has been met with skepticism from some lenders who feel that 95% mortgages aren’t suitable for everyone and borrowers could find themselves needing larger deposits or being declined anyway.

Keep Saving

We’ve all heard the best ways to save whether through a side-line job, matched betting, cutting out takeouts or generally cancelling those unused subscriptions but saving for a home is usually a long-term commitment, and it takes longer than some realise but with the additional factors of recent months and even more pressure to maintain income. It could mean that those who would have chosen to change jobs, stay and keep saving.

It’s going to be a tough time for those who are wanting to move and who struggle to raise the much needed deposit and secure a great mortgage. It is however obvious that covid-19 will affect house prices for many years to come. I wouldn’t say that if there isn’t a great mortgage deal for you now, there won’t be in two or three months time once the restrictions ease a little, but we could all probably be a little cautious with how and when we invest in property.

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Post Disclaimer

Compensation was provided for this post via a third party. The opinions expressed herein are those of the author and are non-indictive of the opinions or positions of the brand. This site contains affiliate links to products. We may receive a commission for purchases made through these links, this is at no cost to you and it is purely at your discretion.

5 Comments

  1. Definitely agree that COVID-19 will have an impact on housing for years to come. We may not understand the full impact for quite a while. In the meantime, it seems like a good idea to keep building savings. With a sizable financial cushion, your will be well prepared when emergencies come along. You will also be ready to snatch up a new home deal when one come along.

    1. Thank you Siobhan, I’m with you. We aren’t in the position to move again yet. Hoping the next 3-5 years. 🙂

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