First-time buyers need to approach the housing market with caution, an industry expert has warned.
According to Paul Davies, spokesperson for Mortgage Financial, young professionals looking to get on to the bottom rung of the housing market should opt for a mortgage product that is suited to their needs and future career aspirations. However, he suggested that following five base rate rises from the Bank of England over the last 12 months and predictions of further increases to come, consumers should ensure that they will be able to make mortgage repayments.
He said: "The first and foremost thing you need to do [when applying for a mortgage] is make sure it is affordable now and in the future, especially with the way interest rates have been going up over the last 18 months or so". Mr Davies added that young professionals, such as trainee doctors and accountants are likely to opt for fixed-rate deals and 100 per cent mortgages to help provide them with "stability" when looking to make secured personal loan repayments and deposits on property as they continue to struggle with debt management difficulties after leaving university. "They tend not to worry too much about the cost because they know their income is going to be shooting up after a year or two", he claimed.
Professionals are also reported to often be able to borrow more money. Mr Davies suggested that secured loan providers "are quite happy to provide higher lending facilities" to such young workers as they recognise that their salaries are "incremental" and consequently will rise once they complete their training. Meanwhile, as a result of receiving steadily increasing salaries, professionals were also regularly said to look for an overpayment facility on their mortgage deal to allow them to pay off their secured loan in advance. As a result, these consumers are said to be able to take out a mortgage at "relatively the same" rate of interest as the average first-time buyer can access but on a higher value product such as a 99 or 100 per cent deal.
Earlier this month, research carried out by the Yorkshire Bank indicated that British households are "not being put off" by the rising cost of property when looking to move into a larger home to extend their family. Gary Lumby, head of retail for the financial services firm, claimed that consumers are becoming "more prudent in their purchases to ensure they can afford their increased repayments".
According to the company, 14 per cent of homeowners are said to be concerned that they could struggle financially if their secured loan payments rise by up to 50 pounds as a result of moving from a two-bedroom terrace to a semi-detached three-bedroom house. However, only three per cent of those surveyed said that the extra monetary pressures of bringing up a child would put them off expanding their home. The news comes after Yorkshire Bank research indicated that the average price difference between the two properties stands at 19 per cent (34,000 pounds), although this can rise up to 80,000 pounds for some of the cities which were analysed.
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