Is Buying a Home Feasible in 2020?

When it comes to life goals; one of the most common ones out there, is homeownership. For generations now, the pivotal societal milestone of success has been getting on the housing ladder. So much so, that the expectation is to get there as early as possible. Times are changing though; first millennials have proven to be less responsive to this ideal and then COVID-19 happened and shifted the housing market even more. When it comes down to it; many feel that buying a home simply isn’t feasible in 2020, but, is this truly the case, and what does it mean for the future?

The 2020 Recession

At the time of writing, we’ve entered a recession; the first since 2009. Economic growth typically means more jobs, better salaries, more tax cuts (sometimes) and more money to go around. So, when the economy is shrinking, the opposite is usually true.

Recessions aren’t good, obviously. The job market is much more difficult; many are lost, bonuses halted and pay increases can become less in line with costs of living. Typically, low income families are hit the hardest; whereas interestingly, homeowners can benefit from decreased interest payments and wind up with more disposable income.

Generally, though; there is less money all round and getting the hefty deposit together for potential new homeowners proves near impossible for most.

Of course, we live in unprecedented times; we’re not just in a recession but a pandemic too.

A Stale Property Market

COVID-19 has led to a property freeze; this isn’t shocking. Not only are less people looking for mortgages though, banks are actually offering less too. It isn’t great for the economy and it isn’t what the government wants. So, naturally; they’ve acted.

In an attempt to get things going again; SDLT, stamp duty land tax (or stamp duty) has been put on halt for a while. The idea being to give a little extra cash to incentivise potential first-time buyers.

Is it enough? I don’t really know; but with fewer mortgages offered than previously, and lenders being (understandably) more cautious.

The Difficulty with Deposits Right Now

Whilst mortgages still exist at all levels; getting a 5% or 10% deposit is painfully difficult now. Checks are more strenuous; you’ll need to be prepared to give a lot of information as the income level and employment type is in the forefront of lenders minds more than ever. This is a consideration to take on board.

Pay More, to Pay Less

Early in the mortgage, some banks allow overpayment without charge. There is usually a threshold for this; around 10%. If you’re able, it can be incredibly advantageous; potentially saving phenomenal amounts over the total duration. So, worth looking into.

Stay Interested

Another thing you’ll need to consider is fixed or variable rate interest. Both have pros and cons, either is a legitimate choice but you’ll need to consider what works for you.

Fixed rate comes with certainty, whereas variable is a gamble as the interest rate shifts and could work in your favour, or not.

Given we are in a recession; fixed rates may well be lower right now. That also means that they’re guaranteed to go up again when we get through this period. This is actually an incredibly important decision.

It All Comes Down to Research and Context

What is clear; is that if you are looking to get on the housing ladder right now, you need to be as savvy as possible; research is critical.

Borrowing during a recession can be risky, but tools like Mortgage Calculator might just give an edge to your considerations; with so much delicate math, I wouldn’t risk the process without such a handy hub for vital info.

If you are in a position where buying a home is a serious possibility at the moment, the global situation is not a reason not to. It is however a reason to take more time and get things right. Traditional knowledge doesn’t apply in its entirety and things are fluctuating and changing fast.

Now and Then

How feasible homeownership actually is right now depends on what funds you have (be prepared for 10%+ deposits) and the patience and willingness to secure the best deal possible. It’s more difficult but not impossible. Just don’t agree to anything you can’t actually handle.

As for the future? Well, The Bank of England thinks the economic slump might not be as intense as predicted. Going so far as anticipating an end to the recession in Q3 of 2020. However, recovery will take a while longer; the Coronavirus continues to have an impact on the way we live our lives and the impact could be felt for years to come.

Disclosure: This is a collaborative post.