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Publication date:

27 April 2022

Last updated:

27 April 2022

Author(s):

Lea Karasavvas

...in Prolific Towers and the topic of conversation with some of my brokers was the recent utility bills we had each received from our home energy companies.

This was swiftly followed by the discussion of how Netflix had lost 200,000 subscribers in the first quarter of 2022 and a prediction from them they expect this figure to rise to a whopping 2m in the next quarter. Is this a combination of a new credit crunch, or password sharing, or is this a result of the price of Netflix now effectively being double what it started at? Who knows, there are arguments for all of the above.

This then lead us on to a discussion about the cost of food. A swift bit of research highlighted that Pasta products saw their prices go up 10.1% year-on-year having already jumped 14.9% in January 2022 as a result of poor wheat harvests in 2021. Meat has also seen a sharp increase with lamb (16.9% up), beef (8.6%) and poultry (7.3%). Milk, cheese and eggs (8.6%) and butter (9.6%) have also seen hikes.

These are just a few of the sharp increases we have seen this year, and with inflation remaining high, pressure is on for yet another base rate increase. Having already seen increases hit in December, February and March, some experts suggest the base rate could be at 2% by the end of the year.

With the pressure of the New EPC regulations for landlords coming in 2025, and the likelihood of this hitting the pocket hard for those graded D and below, increased interest rates, and increased costs of living, it starts to create a somber picture. Throw in the assumed increase of missed rental payments, a test is certainly on the horizon for landlords, and it does beg the question as to how many will stick and how many will twist.

As costs get higher and interest rates get higher, will this result in more supply coming to the market and demand dropping? With interest rates now starting to favour the savers who have been underserved over the years with the lowly rates being apparent, there is a genuine sense that supply will advance and demand will diminish and this could result in a drop in price.

So where am I going with this utterly depressing news?!

I am going down the route of opportunity. Opportunity for those that need it most and those that have suffered longest. The first time buyers!!! I see landlords starting to make a tactical retreat whilst they take stock and evaluate. I see more supply and less demand whilst investors hit the pause button, and I see a HUGE opportunity for lenders to really champion the first time buyers. To help innovate and get them on the market with new products that could favour those desperate to take the first step on the ladder, and ultimately reduce their outgoings from the high yielding rents they have been paying, to slightly more respectable mortgage payments that will start to build them equity and give them a chance of a future of equity building as well as potentially reduce their outgoings.

There is a real opportunity on the horizon for first time buyers. Perhaps having felt like they were losing ever more ground in their plight to get on the rungs of the ladder with headline after headline about soaring property prices, I am of the belief that rate rises, more conservative returns and problematic red tape, may finally see less competition for the FIrst Time Buyers. Properties that are the perfect starter homes but in years gone by, have been saturated by investors desperate for a bargain, could soon start to see less competition.

So all this talk of increased rates, energy bills, petrol, food, inflation, could this all represent an opportunity to first time buyers? With the right help from more lenders, they could have a chance. Price is always driven by demand, and as investors start to think twice about where is the best place to invest right now, this could open the door of opportunity, but as a nation, let’s hope that lenders can help, by offering innovation in a part of the market that has long cried out for help.

First time buyers, I genuinely believe opportunity knocks in the coming 12 - 18 months. Even with increased rates of interest, you can bet your bottom dollar (well pound Sterling) that mortgages will remain cheaper than rent, and now it is over to the lenders to offer as much support as they can.

This document is believed to be accurate but is not intended as a basis of knowledge upon which advice can be given. Neither the author (personal or corporate), the CII group, local institute or Society, or any of the officers or employees of those organisations accept any responsibility for any loss occasioned to any person acting or refraining from action as a result of the data or opinions included in this material. Opinions expressed are those of the author or authors and not necessarily those of the CII group, local institutes, or Societies.