We think it’s fair to say that there have been much better decades to be a first-time buyer than this one. Why? Well, mortgage interest rates are seriously on the up, as are property prices. According to the Office for National Statistics, the current average property price is £288,000.
Most mortgage companies require at least a 10% deposit, which means to buy an average house, you’d have to cough up a lump sum of around £29,000. When we take into account the fact that the average annual wage is around £33,000 and that the average monthly rent is at the highest level ever recorded… it doesn’t take a mathematical genius to see why buying a home can be something of a challenge.
Enter the help to buy scheme
It was exactly this sort of conundrum that led the government to launch the Help to Buy Scheme back in 2013. The premise was (reasonably) simple: first-time buyers could buy a new build property with only a 5% deposit. The rest of the deposit would be covered by an equity loan from the government, which had to be paid back over time.
The scheme was welcomed by would-be buyers keen to get a running start at the property ladder. More than 225,000 buyers took advantage of the scheme, which means a lot of new homeowners in new homes.
However, the scheme wasn’t without its critics. Many people claimed that the main outcomes of the scheme were to fill the coffers of housing developers and to contribute to inflating property prices.
Whichever way you look at it, it’s fair to say that the end of the scheme earlier this year has left many would-be first-time buyers unsure about their next steps.
Affordable housing schemes: what’s on offer?
‘Affordable housing’ is a phrase that often seems to be tossed around in political circles. Perhaps tellingly, however, there isn’t actually an agreed-upon definition of what is meant by this.
Despite this, there are still a good number of affordable housing schemes and initiatives on offer. So, even without Help to Buy, there is still, erm, help to buy.
Shared Ownership Schemes
If you’re struggling to afford to buy your own home, you might want to consider buying part of one instead. Don’t worry, this doesn’t mean you’d have to make do with only three walls and half a roof. Rather, many new developments offer buyers the option to buy a share in a new home while paying rent on the rest.
This can be a way to bridge the gap between renting and homeownership, but it certainly needs to be considered carefully as schemes can be quite complicated. If you’d like to know more about the various ins and outs of shared ownership schemes, we wrote about them in more detail a few years ago here.
First Homes Scheme
If you’re a first-time buyer with your sights set on buying a new build home in your local area, you just might be eligible for the first homes scheme. The downside of this one is that available properties can be few and far between… but if you can find one you might be able to get a discount of 30% off market price. We’ve written about this scheme in more detail, too.
If you’re between the ages of 18 and 40, you can use a government Lifetime ISA to save to buy your first home. You can pay in a maximum of £4,000 per year and the government will add a 25% bonus.
Rent to Buy
The Rent to Buy government scheme is designed to help tenants in England save for a deposit to buy a home. The scheme offers rented properties at a discount on the agreement that tenants put the money they save towards a deposit. There’s a separate scheme for tenants living in London.
Right to Buy
If you’re a council tenant, you may have the option to buy your home from your local authority at a discount. We’ve written about the right to buy scheme and it’s (somewhat controversial) history here.
Mortgage Company Schemes
Mortgage companies make their money from people buying houses. It follows, then, that they’re going to be keen to entice in new buyers. Though they’re certainly far less common than they used to be, there are still some mortgage companies offering 95% mortgage deals. Some mortgage companies are even still offering 100% no deposit mortgages.
Alternatively, many first-time buyers who might otherwise struggle to be approved are taking advantage of guarantor mortgages, which allow buyers to borrow with the backing of a family member. Along these lines, some mortgage companies are offering joint borrower, sole proprietor mortgages: meaning that first time buyers can apply for a mortgage jointly with a family member while retaining full ownership of the property the mortgage is used to buy.
Private help to buy schemes
Speaking of businesses and private schemes, some property developers are seeking to fill the gap left by the help to buy scheme by developing private offerings of their own. Though these could be a helpful way to help get your hands on a new build property, it’s worth remembering that the interest rates offered will not be as favourable as government schemes.
Choosing the right option for you
As you can see, there are still lots of options available if you’re trying to buy your first home but need a little help to get there. However, like most things in life, there may well be an awful lot of weeds to find your way through before you can make the right choice.
We hope it goes without saying that the options above will all come with various financial implications. Some are likely to be better suited to you and your personal circumstances than others, some will be beneficial in the long term while some might not. We highly recommend seeking advice from a trusted independent advisor to ascertain whether any of them are likely to come back to bite you in the behind.
And, of course, please do remember that we’re always on hand to talk through the ins and outs of how each option might impact on the legalities of conveyancing and property ownership.