With the prospect of owning your first property on the horizon, it might be tempting to wait until the election to see if a new government brings with it new incentives aimed at first time buyers. Hesitance right now could be ill-advised, however: whilst some areas have experienced slow growth and others have seen prices drop, there are rock bottom mortgage rates and some attractive deals available to lend a helping hand.
Indeed, it would seem that first time buyers have spotted this opportunity – the number of those taking the leap is at its highest for nine years, with figures from the CMS showing that 342,000 purchased their first home in the last 12 months. However, getting on the ladder is no easier than it was before – and in the under-35s age group, the level of home ownership is at its lowest in 30 years – and just 30% of people under 29 own their own property.
So what can a first time buyer do to maximise their chances of making that all important first deal?
Source the right mortgage
If you’ve saved 10% or more towards your deposit, you’ll be able to choose from a wide range of highly competitive mortgage rates – but what if you’ve only scraped together 5% towards your purchase? Thankfully, despite the end of the Help to Buy Mortgage Guarantee, there are still plenty of 95% mortgages available. Currently, there are 287 to choose from – a huge growth from just 61 deals on offer five years ago. The average rate on these deals is a reasonable 4.18% – not as good as what you can achieve with a bigger deposit but a big improvement on the average of 5.62% back in 2012.
Of course, if you can boost your deposit from 5% to 10%, you’ll enjoy far better rates – so it’s worth asking around the family and considering cashing in on savings to secure that lucrative deal.
Use available schemes
The Help to Buy Equity Loan scheme is still available, allowing those with a 5% deposit to borrow another 20% from the Government (or 40% in London). This means you only need a mortgage of 75%, giving you access to much better deals. Over 56,000 homes have been purchased using this deal which often helps those using it to buy a property that is bigger or better than they would otherwise have been able to afford. The Government loan is interest free for the first five years. After that, the interest is linked to inflation with the rate increasing each year.
Alternatively, consider shared ownership – you buy a share of the property (from 25% to 75%) and rent the remaining share – then purchase further shares of the property when you’re ready until you own 100%. You’ll still be able to move home if you want to – you simply sell your share on to someone else.
Another recent Government scheme is the LISA which launched last month for first time buyers* under 40s – with the Government offering a generous 25% bonus on savings of up to £4,000 a year. However, for this first year of the scheme, the bonus won’t be paid until 6th April 2018. Note that as long as you pay up to £4,000 into a LISA by 6 April 2018, you’ll get the 25% bonus on ALL of it, which you can then withdraw on or after 6 April 2018 to use towards your deposit.
*LISAs can alternatively be used as a pension – click here to find out more.
City centre properties are always going to sell for inflated prices and it would seem that in recent years buyers have been less prepared to accept this. More buyers than ever before are looking to commute in from outlying villages and towns, with 66,000 of those in their twenties and thirties leaving the Capital in 2015. By looking at locations outside of the City, it’s likely you’ll be able to afford a bigger property and therefore enjoy a better standard of living.
Buy with family
For some, the idea of sharing their home with brothers, sisters or in-laws might be horrifying – whilst others see this as a great way to afford a larger home and enjoy more affordable repayments. The number of multigenerational homes is rising and according to Financial Services company Aviva, it could rise to 2.2 million over the next eight years. The key is to buy a large enough property so each family has space and privacy. There’s also the benefits of living with parents to consider – with an extra helping hand available whenever its needed.
If you need advice on buying your first home, talk to our property team.