It’s tougher than ever to own your own home. Any aspiring first time buyer in the UK has to deal with a double whammy of higher mortgage rates and surging rental costs while they try to save.

But for those buyers who are able to make the jump onto the property ladder next year, there may also be some opportunities.

Experts have their say over what 2023 holds for first time buyers.

Opportunities for first time buyer in the UK

First time buyers could well hold greater bargaining power than previously. There is now a wider choice of properties and perhaps sellers will be more willing to consider lower offers.

In addition, they may also be able to use their chain-free status to pick up a deal. At a time when there is generally more caution surrounding the housing market, sellers might be wary of a long chain, where one issue further down can ruin things for everyone. With just one link below you, there is less chance of such problems, meaning that first time buyers could be much more attractive to sellers, even when tabling lower offers.

The prospective homeowner challenges

The biggest challenge for first time buyers in the UK remains building a big enough deposit. With rents rising and costs at the shops spiralling out of control, there is less room to save for a house deposit. And yet, it is one of the ways that find more favourable mortgage rates.

Simon Gammon, managing partner at mortgage broker Knight Frank Finance, said it may help first time buyers if they are able to build a bigger deposit. He said: “If you can save in this type of environment, you can put down a bigger deposit, maybe rely on parents or grandparents to create more of a deposit, then that will help you get, one, more mortgage options, and two, a lower rate, so it’s a double win. I think the most proactive thing you can do right now is work on your deposit, as much as that’s painful with all the other costs going on. But the bigger the deposit, the better your options when it comes to a mortgage.”

How the housing market looks

Richard Donnell, executive director at Zoopla, said: “Rents are expected to rise further in 2023, adding to the impetus to buy, although raising a deposit will remain the biggest challenge for first time buyers as the best mortgage rates will be for lower loan-to-value mortgages.”

Rightmove’s property expert Tim Bannister said an immediate drop in demand in the first time buyer sector was seen following the mini-budget, as mortgage rates jumped.

A string of Bank of England base rate hikes have taken place over the past year, with the most recent seeing the base rate jump from 3% to 3.5% in December.

Mr Bannister said: “First time buyers are often stretching themselves to the absolute maximum in order to get onto the ladder, and those who were in the earlier stages of their moving journey suddenly faced much higher monthly repayments and very quickly had to reassess their circumstances.

“Heading into the new year, the signs are that things are starting to settle, which should give those looking to purchase their first home more confidence.”

Mr Bannister continued: “However, first time buyers still face the challenges of being able to borrow enough for the home that they want, and saving up for their deposit. A 10% deposit on an average first time buyer type property is now £22,169.”

He added that “First time buyers who can afford to move next year may find they have more choice, and more negotiating power than they might have done during the pandemic frenzy, though they should not expect major price drops or bargains next year. It still remains an objective for many to get onto the ladder, particularly as the alternative for a lot of first time buyers is paying record rental prices.”

Mortgage guarantee scheme

In December, the Government said that the mortgage guarantee scheme, which was launched in April 2021 to help the average first time buyer in the UK, would be extended until the end of 2023. The scheme, which helps people buy a home with a 5% deposit, had been due to close at the end of 2022. Lifetime ISAs, which come with a Government bonus, can also help people to save for their first home.

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