It's been quite a repetitive story over the last two years.
"Business has been good, but we just don't have enough stock!"
"Vendors are lacking a confidence to bring their property to market. They just don't feel there is a big enough demand for it given the "current lending proposition" from lenders.
"If only we could do something to stimulate the first time buyers!"
These are just a selection of comments mortgage brokers have become accustomed to hearing from estate agents all over the country in the last few years. As it became harder to obtain finance for first time buyers due to higher interest rates and lower income multiples, the property market stagnated somewhat. Chains could not get established, missing vital links to complete them. Finding a first time buyer or second stepper was as tough a task as a finding a new computer without Windows 8 (don't get me started on windows 8).
However, recent price wars fuelled by the Funding for Lending Scheme, have seen a significant reduction in interest rates at higher loan to values. 90% borrowing currently demonstrates rates at considerably less than they were 2 years ago. Competition from some of the bigger lenders, and a cheap availability of funds, has seen First Time Buyers return to the market. It has also demonstrated to some, that second steppers now have the ability to move property again. In our first quarter of 2013 we have seen more First Time Buyers during this period since pre credit crunch.
There has been a role reversal in the sales process. Gone are the days when clients would "go shopping" for a property, find the place of their dreams and simply offer knowing that the mortgage placement was mere formality. The complexities of the market have educated the public a lot more and the first step is now to visit the broker first, obtain a decision in principle and a generic idea of borrowing and then, once this has been established, the buyer goes out to the market to see what is available. The knock on effect here, is that brokers see the public first, position a maximum borrowing from lenders, and then they commence the "shop". This means that buyers are more educated on their budgets, know in general what they can afford, and also know that "in principle" they are good to proceed with a lender, speeding up the process and bringing back a solid first time buyer to the chains whilst also ensuring there is a confidence with the vendor and agent that the purchaser is "solid".
The reduction of rates at higher loan to values has resulted in many brokers seeing a lot more of these clientele and it would be safe to assume that agents will soon be the beneficiary of an influx of first time buyers/second steppers ready to "get active" in the market again. Logic suggests that as demand starts to outweigh supply, the only thing that can happen to price - is it will raise. Whilst this is basic economics - the concept of demand and supply is never more prevalent than in the the property market and Dr Poole will be encouraged to see me applying this to my trade (Economics, Class of 92, never forget).
There are many other external factors of course that effect this market but right now, as a broker I am encouraged, and as confidence returns to our purchasers, it will also return to our vendors, so estate agents should share our optimism. Demand, in my eyes will increase this year as availability of funds at respectable/affordable rates across all loan to values looks set to increase.
Optimism should be returning to the market with this assistance of the Funding For Lending Scheme and coupled with the house prices increment of 5.2% from February 2012 to February 2013 recently announced, estate agents and brokers look set for one of the busiest years since the crunch. As broker confidence in first time buyers and second steppers has undoubtedly increased, so too should the expectation from agents that the market will soon see an influx of buyers not witnessed for some time.
Sealed bids could soon be back with a vengeance...
