The first-time buyer forecast for 2023

Although we don’t have a crystal ball for predicting the future of the property market, we do have access to live data, historical trends and industry insights, allowing us to advise home movers on the year ahead. 

There is one forecast that is perennially sought in January and that is ‘will it be a good year to buy my first home?’. Our immediate answer is always ‘that depends.’ First and foremost, a first-timer buyer will need to assess their own personal circumstances to start answering the question.  

Personal affordability comes first

Our team is happy to help buyers take stock of their current living situation and finances to weigh up whether that first property purchase is affordable. Factors such as income, size of a deposit, savings and employment status should all be evaluated in tandem with desired property value, size and location. Once the numbers are crunched, we’ll be able to show whether upfront buying costs and monthly mortgage repayments make a property purchase an affordable move. 

Shop around for the best mortgage rates

In 2023, the wider property market looks set to help first-time buyers become homeowners, with positive signs across the board – starting with mortgage rates. While it’s hard not to compare today’s rates with the lows of recent years, anything under 2% is, historically, quite unusual. Falling inflation and careful planning among lenders means mortgage rates are actually coming down, with predictions pointing to a new normal somewhere between 4% and 5% during 2023. 

For the first time in almost a decade, tracker mortgages – and not fixed rates products – are sometimes proving more affordable for first-time buyers. Speaking with a financial adviser or a mortgage broker is the best way for first-time buyers to secure the most affordable repayments and attractive terms. 

5% deposit mortgages to continue

Staying with mortgages, the Government has announced that first-time buyers in the UK should continue to have preferential access to specific mortgage deals – great news for those struggling to save. The Mortgage Guarantee Scheme is now open until December 2023, with first-time buyers able to purchase a property up to the value of £600,000 with a 5% deposit, as long as they meet the qualifying criteria. 

Opportunities for a zero or low stamp duty bill

First-time buyers enter 2023 with stamp duty on their side. This tax, which is paid upon completion, currently has special thresholds for first-time buyers. Choose the right property to buy and you may not have to pay any tax at all. In England, stamp duty only applies to first-time purchases worth more than £425,000. In Scotland, there is no tax to pay if the home bought is worth £175,000 or less and in Wales, property purchases of £225,000 or less are tax free. 

In England, First-Time Buyers’ Relief was changed in late 2022 to favour the first-time buyer. The old bracket of when 5% tax was applied has been made more generous specifically for first-time buyers. The 5% tax used to apply to the portion of the purchase between £425,001 and £500,000 but this has been widened to between £425,001 and £625,000 – an extra £125,000 buffer. 

Let the Government add to your deposit pot

Did you know there is an ISA specifically for first-time buyers saving for a deposit and the Government will make an additional contribution? The Lifetime ISA will continue to run in 2023, with the Government gifting 25% of each saving amount. For example, if a first-time buyer deposited the maximum annual amount of £4,000 into the ISA, the Government would add £1,000 that year. There are some restrictions when it comes to how much you can save per annum and withdrawing the deposit to buy a property but these points are far outweighed by basically free money that will boost the size of a deposit.

Buy brand new for extra savings

First-time buyers in England looking to make further financial savings can also explore the Government’s First Homes scheme. It’s only open to those buying qualifying brand new properties but it’s worth seeking out the housebuilder taking part in the initiative, as some new builds are offered at a 30% discount. There are a few caveats attached to the scheme – such as the income of the buyer and the price the home can be sold for in the future – but we can talk through these implications with you.

If you would like to know what property you could afford, how much deposit you’ll need and how much stamp duty you may pay, please get in touch for one-to-one, tailored first-time buyer advice.