First time buyers: How to buy your first home in a tough economy

By Vicky Shaw

August 25 2022, 5:00 pm

It's tricky to make everything add up in the current economic climate, but first time buyers can do a lot to help themselves.

With mortgage rates jumping and house prices rising, aspiring first-time buyers face an uphill battle to get on to the property ladder.

The Bank of England hiked the base rate by 0.5 percentage points to 1.75% in August – the biggest single rate jump since 1995 – meaning would-be first-time buyers may have higher monthly mortgage costs than they had previously budgeted for.

It’s a wonderful feeling buying your first home making all that effort worth it.

Monthly payments

Property website Rightmove recently calculated that a combination of rising house prices and interest rates mean average monthly mortgage payments for new first-time buyers putting down a 10% deposit now exceed £1,000 – at £1,032.

Despite these challenges, the determination to get on the property ladder remains strong.

Demand for properties in the typical first-time buyer sector is 32% higher than at this time in 2019, Rightmove says.

It’s a tough market, but there are steps to make navigating it a lot easier.

So, are there things that might help first-time buyers navigate the tough market?

Graham Sellar, head of business development for mortgages at Santander UK, shares the following tips:

Top tips

1. Don’t panic

Buying a house is a really big financial commitment, says Sellar, so stay calm. “Yes you’re reading that prices are going up, and yes you’re reading that the cost-of-living is going to affect affordability, but the market’s very active at the moment.”

In what could bring some relief, some reports have pointed to a cooling in house price growth, with Halifax saying average UK house prices slipped back in July from a record high the previous month.

Rightmove reported that average asking prices were down month-on-month in August, although this is in line with the usual summer lull.

Graham Sellar, head of business development for mortgages at Santander UK, says buying a home requires keeping a cool head and staying calm.

2. Read up on the subject

Sellar suggests reading up on what becoming a first-time buyer involves. “Treat it like a book and read what is it that you do from start to finish, and start to visualise you doing that yourself. Then think about: How do I save the deposit? Where do I want to live? How much can I borrow?”

Doing your homework is essential so you know exactly what you can afford and what’s available to you.

3. Make the idea of borrowing become more ‘real’

Sellar suggests making the most of online mortgage calculators to get a realistic idea of how much you may be able to borrow. Calculators can “make it more real” and help aspiring homeowners work out the type of property they can afford and the location.

4. Spend time thinking and looking

Some people may want to seek independent advice and speak to a broker or bank. Weigh up how long you want the mortgage to run and it could affect monthly outgoings.

Getting on the property ladder always requires some effort, especially now.

5. Check your credit report

Make sure you are on the electoral roll, as this can affect credit scores. If you already have credit, always pay that and any mobile phone bills. Don’t ignore bills and seemingly minor disputes.

6. Can family help?

There are mortgage options for first-time buyers whose parents are in a position to help.

Many lenders offer mortgages for people with deposits as low as 5%, but the interest rate you will pay may be higher than with a bigger deposit.

7. Consider wider support

There are various schemes and discounts, such as relief on the land and buildings transaction tax in Scotland. Lifetime Isa savings accounts are also available for eligible people buying their first home, which come with bonuses.