Despite being hailed as a helping hand for first-time buyers, it doesn’t look like 2017’s Autumn Budget has actually provided the answers needed to get onto the property ladder. In fact, sales, new buyer enquiries and new vendor instructions have continued to fall, despite the removal of Stamp Duty on property values up to £300,000.
What is holding first-time buyers back?
Even though a major tax has been removed for certain properties, and reduced for others, there are still many things standing between first-time buyers and owning their dream home, including:
1. Rising house prices
House price growth might be described by experts as ‘subdued’ at the moment (Source: Nationwide House Price index), but that is little consolation for first-time buyers who are feeling the 16.5% increase in average house prices over the past 10 years to £226,185. (Source: Office for National Statistics(ONS), using figures from July 2007 and July 2017)
What to do: This is mainly out of your hands, but there are things you can do to decrease the amount you will pay for your home. Start by reviewing and improving your credit score, to access better interest rates when applying for a mortgage.
It is wise to make sure that you are pre-approved for a mortgage before approaching a vendor, as having an Agreement in Principle will put you in a better position to attempt to negotiate on price.
2. Saving for a deposit
With rising house prices, comes the need for larger deposits, and, as the average UK adult wage has increased by just £4,420 since 2017 (Source: ONS), it is getting harder for those relying on income alone, to save enough to buy the home they want.
What to do: Make sure you are saving as much as possible. Keep track of your day-to-day spending and see if there are any expenses you could cut out, or reduce, to put more toward buying your first home.
Secondly, ensure you are saving in the right place. If you are between 18 and 39, you can open a Lifetime ISA (LISA), which allows you to deposit up to £4,000 each year and will attract a 25% government bonus on everything you put in.
Although, you will lose that bonus, and some of your original savings, if you choose to withdraw this money for any reason other than a mortgage deposit or as retirement income when you reach 60.
3. Slow uptake of government schemes
The idea of Starter Homes was introduced four years ago, yet work has only just begun to develop them. The theory is that these homes will be available to first-time buyers at a discounted price, which will enable more people to get onto the housing ladder. However, this doesn’t help until it is in place.
What to do: If you are still saving for a deposit and think it may be a couple of years before you are ready to buy a house, you could wait it out and see what comes from the scheme when it is fully underway.
If you don’t want to wait that long, consider taking advantage of the other schemes available for first-time buyers, such as Shared Ownership, which allows you to buy between 25% and 75% of a property, whilst paying rent on the rest, with the opportunity to buy more later.
You can also look into Help to Buy Equity Loans, which offer a 20% deposit, meaning you only need to provide 5% and secure a 75% mortgage.
4. Finding the right property
A lot goes into choosing a property, and it’s not uncommon for first-time buyers to spend months, if not years, searching for the perfect home before making a commitment. Of course, there’s nothing wrong with wanting everything to be just right. However, be aware that the longer you search, the higher house prices will creep.
What to do: You could think about compromising on some of your ‘must-have’ features. If it is possible to add these in later by remodelling, or redesigning the house, it may be worth investing in a fixer-upper and improving the property gradually.
5. Take advice
The first time you do anything, you will need to ask for guidance. So, why let buying your first home be any different? With so many mortgage deals available, there’s no point trying to go it alone when you could have a professional in your corner.
Talk to us about whatever is holding you back from owning your first property, contact us on 0800 612 8099 or request a call back by clicking here.