Getting on the ladder

Just graduated and thinking of taking those first tentative steps on the property ladder? Put off by the constant rumblings of a mortgage crisis? Well, I don’t blame you. Various commentators predicting doom and gloom in the housing market seems to be a feature of everyday life over the past couple of months, so it is perhaps no surprise that there is a serious dirth of first-time buyers.

But what happens if you are a young professional, in a reasonably good financial position and are itching to run down to Ikea and furnish your newly purchased pad? Is now really a good time to be considering it and what should you be on the lookout for if you are heading down that route? In the second of our articles on finance, we look at the current mortgage market and how to approach it.

Keep track

• Staying ahead of the game is one of the most important pieces of advice you can take on board when it comes to applying for and securing a good mortgage deal. With the current financial climate lenders are changing their rates on a daily basis, as those who offer the most attractive rates get swamped with applicants. This causes them to hike up their rates and they therefore leapfrog the other lenders until another provider is at the front of the queue and then the same process happens again.

Obviously keeping track of all these movements is incredibly difficult especially for those who are new to the housing market. Therefore, it is prudent to see an Independent Financial Adviser, who is there to keep abreast of all the latest happenings. Alternatively stick close to your computer and regularly check the internet for developments, as well as keeping an eye on the financial pages of the broadsheets, which profile the latest mortgage deals.

• The mortgage marketplace is already a very different place to what it was a couple of years ago. Then, there were myriad products available, so a lender could tailor a mortgage specifically to your needs. There was a choice of discounts, tracker mortgages, capped rate deals and fixed interest options. Now, if these products are available, the amount of time they are available for is limited.

With this in mind, you should ensure you are knowledgeable about all the different types of mortgages available even if that means putting in some serious research. Remember – the more you know about the situation the better placed you will be to react to changes in the market.

Industry confidence

• Despite the increasing uncertainty among lenders, it may surprise you to know that the Bank of England has not changed its base rate, and in fact it is widely believed that they will lower it in the coming months. Even so, confidence is key and lenders’ rates are still increasing, so you need to ensure that if you do decide to take on a mortgage you will be able to afford any fluctuations in interest rates.

• Having a good deposit wasn’t such a big deal for first time buyers in the not too distant past. One hundred per cent mortgages and even deals that rolled outstanding loans into a mortgage were common and so saving up before you bought a house wasn’t essential. However, now lenders are requiring increasing amounts of deposits, so it is important you build up a decent nest egg before even contemplating putting an offer in.

• There is some good news on the horizon, and that has been reserved for savers who will benefit from the rise in interest rates. Also, first-time buyers now will be borrowing in a more cautious lending environment than those who joined the property game in the early noughties. This means that they will not be overstretching themselves financially by taking out a mortgage they can’t afford and so will be able to ride out any future storms much more easily.

Thanks to Daniel James CertPFS, CII (MP), Independent Financial Adviser, BDA Plus/Lloyd & Whyte (Financial Services) Ltd, Tel: 0845 130 1366, BDA Plus is a trading style of Lloyd & Whyte (Financial Services) Ltd used under licence from the British Dental Association., Lloyd & Whyte (Financial Services) Ltd is authorised and regulated by the financial services authority.

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