It’s not easy being a first-time buyer. Higher house prices, property market instability and stricter lending criteria are all combining to make things that much more difficult for today’s aspiring homeowners, also known as ‘Generation Rent’.
ONS data shows the age at which more than 50% of people own a home now stands at 36, up 10 years since 1997. Buying later, however, means that more people now face paying their mortgage into retirement. And, with a recent study showing that today’s young adults are only half as likely to own their own home as those born 20 years ago, it’s little wonder that many despair of ever getting their foot on the property ladder.
A Silver Lining
However, recent figures show that things could be looking up. August data from UK Finance suggests that now may be a good time for first-time buyers to take the plunge. The number of mortgages (35,010) handed out to this group in August was up by 0.7% on the same month last year, the highest figure since August 2007, at the beginning of the financial crisis.
Help to Buy is at hand
Many young people think they’ll be saving for years before home ownership is a possibility. But they may not have to: help is out there for first-time buyers which aims to close the affordability gap.
Although the government’s Help to Buy: ISA scheme is due to close to new savers on 30 November, the Help to Buy: Equity Loan will remain available until March 2021. With an Equity Loan, the government lends up to 20% of the cost of your home, meaning that you only need a 5% cash deposit and a 75% mortgage to make up the remainder. The government has also announced a new Help to Buy scheme to run between April 2021 and March 2023. This scheme will also include regional property price caps, ensuring access to those who need it most.
Meanwhile, Shared Ownership offers first-time buyers who can’t afford to purchase outright, the opportunity to buy a share of a property (between 25% and 75%). Owners then pay rent on the remaining share, with the chance to purchase more of the property at a later date via a process called ‘staircasing’.
The rise of the 40-year mortgage
More lenders now offer longer mortgage terms (up to 40 years) to cater to prospective buyers who are finding it difficult to meet the affordability criteria for a standard mortgage. While this has the benefit of reduced monthly payments, the downside is that you’ll pay more interest than someone with a 25 to 30-year mortgage.
Don’t go it alone
Buying your first home can be stressful, and there’s so much information out there that it can feel overwhelming. If you’re unsure about the various schemes available or which mortgage term best suits your needs, then just get in touch by calling 0330 22 333 10
Your home may be repossessed if you do not keep up repayments on your mortgage