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We've done the research for you, by gathering up the 6 top predictions First Time Buyers need to know for 2021 from expert sources. 

2021 Mortgage Predictions depend on what happens with the COVID-19 pandemic, Brexit and the economy but there are some promising signs in the mortgage market according to Which

Whether you’re a first time buyer or an experienced homeowner. 2020 has been a very uncertain and anxiety filled year. With many mortgage deals disappearing and millions of homeowners needing to take out payment holidays due to the COVID-19 pandemic.

But does 2021 bring some light at the end of the tunnel for First Time Buyers? Lets talk about 95% mortgage deals, housing prices, and increased affordability!

1. High rates on 90% mortgages will begin to drop in January

In March, the UK saw First Time Buyers with a deposit of 10% having almost 780 different mortgages to choose from! (Mad!) But unfortunately in October that number had fallen to just 50. (Sad.)

But there’s good news ahead! In November and December 2020, lots of lenders relaunched their 90% mortgages! 

This means that although rates remain significantly higher than before the pandemic, now the competition is picking up again we could see cheaper deals on the horizon. (Yay!)

2. 95% Mortgage won’t return as fast as expected

In October we saw Boris Johnson pledge to make low deposit mortgage deals (only 5%!) more widely available as part of a drive to turn ‘generation rent’ into ‘generation buy’ - just what we wanted to hear!

Due to the uncertainty that comes with COVID-19 and Brexit in 2021, Which say that ‘it would be a surprise if banks reintroduced their 95% mortgages in the first part of 2021.’

This means first time buyers will need to save for a 90% deal mortgage deal at a minimum, (or save a 10% deposit). Although, you can turn to the Bank of Mum and Dad for support, or look at alternatives such as the new Help to Buy Equity Scheme or a Joint Borrower Sole Proprietor Mortgage to boost your chances.

We’ll hopefully hear another update on this from big Boris in 2021, because 95% mortgage would be helpful. 

3. A potential borrowing boost for First Time Buyers

The Bank of England is conducting a review of it’s mortgage rules. They currently cap the number of mortgages offered by calculating the affordability by four and a half times the buyers annual salary. (Sometimes higher!)

A relaxation of these restrictions might boost the borrowing power of first time buyers. How amazing would that be?!

4. A New Help to Buy Scheme will launch in April, but could be a slow burner

Help to Buy has been very popular for first time buyers, buy housing developers have been accused of inflating the cost of new build homes. This new scheme will see the government implementing regional price caps. 

The new scheme will see that first time buyers can get on the property ladder with as little as a 5% deposit in England. But the success of the scheme depends on the lenders (banks and societies) deciding on whether to offer the scheme in the current economic climate. 

5. Buy now pay later schemes, like Klarna could begin to hurt your credit score

Klarna, Laybuy and Clearpay are just some of the companies offering shoppers to spread the cost of payments, with many currently not affecting your credit score if payments are missed.

If a customer misses a Klarna payment it’s not currently reported to credit reference agencies – but Klarna’s UK lead Alex Marsh told Radio 4’s Moneybox that this will soon change.

He said: “What we are looking at in terms of to protect consumers is to work with the credit reference agencies to enable reporting in the future. We work with debt collection agencies to support customers on payment plans. They [debt collectors] do not have the ability to report back into the credit reference agencies.”

However this will most likely change in the near future! 

An Experian spokesperson said, ‘If these credit schemes are used properly they won’t hurt your credit rating, and in some cases could even strengthen it. But it’s important for people to carefully check with their signing up for.’

6. House prices to grow in 2021

Rightmove predicts that ‘a robust 4% national average house price growth in 2021.’

Recently, there has been unexpected demand for moving house in a pandemic, leading to a record number of property transactions, according to the Buy Association. Successive lockdowns have led many homebuyers and tenants to reassess their home priorities.

Portico Direct explains: “As more businesses and employees recognise that working from home is a practical reality, estate agents report a growing demand for larger properties that provide adequate permanent space to work.

7. Prepare for a stamp duty holiday rush

In December the governments said it does not plan to extend the temporary relief offered to house buyers via the stamp duty holiday, so prepare for a home buying rush at the beginning of the year.

Remind me. What is stamp duty? 

Stamp duty is payable on the purchase of a property – typically within two weeks of completion – and is charged in ‘slices’ based upon the property price. A 2% charge applies to the slice of property between £125,000 and £250,000, so with the average home in England selling at £247,000, existing homeowners buying their next home could potentially save around £2,440 each.

However, Stamp Duty is only applied in Northern Ireland and England, due to Scotland and Wales having their own property taxes. AND if you’re a First Time Buyer purchasing a property for less than £300,000, you’re already exempt. 

So, what are you hoping for in 2021? Let us know on social media, hashtag #MortgagePropeller to join in! 

Have a good one!

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