Since the beginning of 2019 there have been a lot of new articles giving hope to first time buyers and those who have, for so long, thought that the prospect of getting onto the property ladder was just a pipe dream.
Two significant factors stand out:
- The Help-to-Buy scheme was introduced in 2013, and, since then almost half a million properties have been purchased using the scheme and first-time buyer mortgages have grown by a whopping 37% to the end of 2018. This is the highest number for 12 years! During 2018 the average first-time buyer was 30 years old and borrowing an average of £142,5000.
Although in 2018 this borrowing still represented loans of an average 84% of the property value, it appears that more lenders are considering 95% mortgage products, allowing those buyers trying to save for a deposit whilst having to rent a property, to breathe a sigh of relief.
- Figures show that house prices have risen by just 0.2% this February 2019, which shows a significant slowdown in property prices, being the lowest recorded price growth since 2009, according to the latest Rightmove house price index. This goes hand-in-hand with 2018’s reported wage growth standing at 3.4%, meaning that buyer affordability is improving at the fastest rate against average new seller asking prices since 2011.
Miles Shipside, Rightmove director and housing market analyst, commented: “Buyers are also being given the leg-up by cheap mortgage rates, if they can meet lenders’ criteria and lay their hands on enough deposit. Prospective buyers in South East England, Greater London & East of England are seeing new seller asking prices cheaper than a year ago, indicating that buyers have the upper hand over sellers when it comes to negotiating a price.”
Minister of State for Housing, Kit Malthouse MP, said: “The government is committed to helping more people get on the property ladder as we power through to delivering 300,000 homes a year by the mid-2020s.
“Our Help to Buy equity loan scheme has supported more than 190,000 households in purchasing their home, helping to make the dream of home ownership a reality for a new generation.”
The schemes explained
Help to Buy equity loan – the government lends you up to 20% (40% in London) of the cost of a new build home, so you’ll only need a 5% cash deposit and a 75% mortgage to make up the rest. This scheme was due to close in 2021 but it will now run until 2023 and will be restricted to first-time buyers only and to houses with a market value up to new regional price caps, including £186,100 in the north east stretching up to £600,000 in London.
Help to Buy ISA – this product lets first-time buyers save up to £200 a month (£1,200 in the first month) and receive a government bonus of 25%. They are only available to open until 30 November 2019 but you can still claim the government bonus and save in to a Help to Buy ISA until 1 December 2030.
Statistics – The Ministry of Housing, Communities and Local Government show that 494,108 completions took place using one or more Help to Buy schemes to the end of 2018 and over 93% took place outside of London. In addition, the Help to Buy equity loan scheme supported around 1,000 sales a week in 2018. The London Help to Buy scheme – which provides an equity loan of up to 40% for buyers in the capital with a 5% deposit – has helped 15,056 buyers across 33 boroughs purchase their own property between February 2016 and September 2018.
TOP TIPS FOR FIRST-TIME BUYERS
Set a savings goal
75% of first-time buyers state that saving for the deposit is the most difficult part of the house buying process. It will take an average of 4 years steady saving to grow the deposit to the amount necessary to buy an average first-time buyer home. It is incredibly important to plan your savings with a specialist financial advisor and ensure you remain focused to stay on track.
To the end of 2018, first-time buyers had opened 1.4 million ‘Help to Buy: ISAs’. These schemes allow an individual to save up to £200 per month into a special savings account, also being able to put an initial lump sum of £1,200 into the scheme to start with. They have low interest rates, tax free interest and, for every pound you save the Government will give 25p. In addition, couples can open individual ISAs and when ready to purchase, put them together for a maximum bonus of £6,000 from the Government. This can mean you are ready to buy 3 years sooner than you would have been without using the scheme.
Research the market and discover the best places to buy
House prices are more than 12 times average annual income in some cities but, at the other end of the scale there are some really budget=friendly places to get a bargain. New data from end of November 2018, from Lloyds Bank, has revealed the country’s most – and least – affordable cities to buy a home, based on the ratio of average house prices to average earnings. Widening your search area and considering different locations can mean your money goes further.
For more information click here to be taken through to Which?
Most affordable cities in the UK:
| Stirling | Scotland | 4.4 | £181,699 |
| Londonderry | Northern Ireland | 4.4 | £118,436 |
| Newry | Northern Ireland | 4.5 | £141,069 |
| Bradford | Yorkshire and Humberside | 4.6 | £139,060 |
| Lancaster | North West | 4.7 | £151,721 |
| Aberdeen | Scotland | 5 | £154,550 |
| Belfast | Northern Ireland | 5 | £129,203 |
| Hereford | West Midlands | 5.1 | £236,549 |
| Perth | Scotland | 5.1 | £188,318 |
| Sunderland | North | 5.2 | £116,424 |
| Carlisle | North | 5.3 | £135,153 |
| Liverpool | North West | 5.4 | £136,894 |
| Dundee | Scotland | 5.4 | £124,557 |
| Swansea | Wales | 5.5 | £144,782 |
| Glasgow | Scotland | 5.5 | £134,327 |
| Stoke On Trent | West Midlands | 5.5 | £113,191 |
| Durham | North | 5.5 | £107,510 |
| Hull | Yorkshire and Humberside | 5.6 | £113,065 |
| Inverness | Scotland | 5.8 | £170,923 |
| Derby | East Midlands | 5.9 | £161,649 |
Be prepared to compromise
63% of first-time buyers will adjust their search locations due to affordability. On average, new buyers will end up moving 29 mins or 5.2miles away from where they originally intended. It is good to consider looking at popular commuter towns to find affordable areas; eg, aspiring London buyers could consider boroughs such as Barking and Dagenham where property prices are much lower. Always remember, a flexible approach to location can help when taking your first step onto the housing ladder.
You could also join the growing number of first-time buyers using Auctions, to expand their deposit amount. You can buy cheap, put the work in and modernise a property, but ensure you do your homework thoroughly before using this approach. You will have to work to a tight budget and ensure you do not overspend on your refurbishment budget to make this a viable proposition.
For information on traditional auctions check out:
https://www.eigpropertyauctions.co.uk/
And online auctions:
https://www.iamsold.co.uk/auction/online-auctions/
Know the costs of moving
Aspiring homeowners must not forget the additional costs associated with buying a home, such as surveyors, conveyancers/solicitors, mortgage set-up fees. Whilst most first-time buyers will not have to pay stamp duty as it is 0% on homes up to £300k, they should still budget for around £2,500 in fees.
