Time running out for first-time buyers to get on the property ladder

Published: 06/03/2015

From April 2015 retirees will be able to drawdown their pension as a lump sum to use for whatever they wish. Lynne McCaffrey explains how this is could have a catastrophic effect on those looking to buy their first home.

“The baby boomer generation as it’s called are about to see a massive change in their pension provision. In April they will be able to withdraw their pension savings as a lump sum. Commentators are predicting that the destination for those funds for many baby boomers will be a buy-to-let property. Many baby boomers see property as a secure investment and buy-to-let as a means of generating a pension income whilst still having an asset to pass on to their families.

“The buy-to-let market is already competitive; indeed data from the Mortgage Advice Bureau based on searches through the UK’s main price comparison sites showed that in the final quarter of 2014 people said they had £99,914 equity to put into a buy-to-let property. That’s a substantial lump sum and with pension funds becoming available equity investments in buy-to-let can only increase!

“A separate survey conducted by holidaycottages.co.uk found that 38% of people over 50 are planning to access their funds from their pension pot at 55 once the new pension freedoms come into effect. Of those 20% are considering investing in property. Again this survey points to an increase in grandlords – interestingly many of those polled were interested in investing in holiday properties. That will push up prices further in already highly competitive tourist areas where first-time buyers are often priced out of the market.

“Growing numbers of young people are already trapped in the private rental market and following the changes in April their numbers will most probably swell. So, financial commentators are urging first time buyers who are thinking about buying and in a position to buy to act quickly before prices start to rise again. Indeed recent HM Revenue and Customs data shows that property sales dropped in January – the calm before the storm perhaps? Certainly predictions are that sales will rise as the weather improves so again another reason to act quickly and get on that property ladder!

“Taking that step to buy your first house can be daunting – our experience can make the legal process much more straight-forward. We’ve produced a video to help you get started!”

Content correct at time of publication