Much has occurred in recent years to support the First-Time Buyer such as; a low interest rate environment, the Bank of Mum and Dad, and various government schemes.
This has helped to drive up the share of first-time buyers from 36% a decade ago to an estimated 47% of all house purchases financed by a mortgage in 2017.
(Source: Halifax, July 2017 release)
Bank of Mum and Dad (plus family and friends)
In fact, in 2017, parents, family and friends are expected to provide a massive £6.5bn to help their loved ones get onto the property ladder. A contribution that supports close to 300,000 property purchases, equating to an average of over £21,000 per home!
(Source: Legal & General, Bank of Mum & Dad report 2017)
However, not all first-time buyers will benefit from this, and most may still have to address the stamp duty and deposit costs, quite apart from jumping through the affordability hoops to secure a suitable mortgage loan. This is where we can help.
Government initiatives and market deals
As you may know, there are numerous government schemes across the UK to assist first-time buyers. Generally, they open up the opportunity to secure a property for possibly a smaller deposit (around 5%), or may offer a discounted purchase price. Understandably, there are various rules regarding eligibility, with certain strings attached.
Additionally, a less complicated approach may be to try to access some of the higher loan-to-value deals available in the wider marketplace, assuming the borrower can meet the deposit and affordability criteria.
Elsewhere, there are other types of schemes that could be considered. One example is Shared Ownership (if applicable), should you be unable to afford 100% of a home. In which case, you could buy a share of its value (between 25-75%) and pay rent on the remaining share. Later on, if you can afford it, you could buy a bigger share.
Low(ish) interest rate environment
With the first Bank Rate rise in over 10 years, the hunt for a suitable deal may become harder should lenders start to pull back from offering the lower deposit requirement deals, or start upping their interest rates.
Of course, as we mention elsewhere the current Bank Rate of 0.5% (at the time of writing) is a long way off from the last rise in the Bank Rate to 5.75% back in July 2007.
So let’s consider this 5.25% spread (0.5% vs. 5.75%) and what it equates to in purely interest costs (quite apart from paying off any of the capital). Against the average first-time buyer loan of £140,000, it would result in paying out an extra £613 a month back in 2007!
This amply demonstrates that we still live in a ‘low-interest rate’ environment, even if there have been some increases. However, as the options on offer can be complex, it makes sense to take advice. We’d listen to your requirements, assess your financial position, and endeavour to help identify a suitable deal.
Please talk to us to see if we can help you (or a family member) step onto the property-owning ladder.
Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured against it.
Our broker fee is £395, payable should you ask us to arrange your mortgage, payable on application. This fee will be fully refunded if the mortgage application is declined and we are not able to source a suitable alternative lender.
20-30 years ago the average first-time buyer would have been in their early/mid 20’s and would have found it relatively easy to get a mortgage. It’s all changed now:
- Average age = 30
- Average loan size = £140,000
- Average loan-to-value = 85%
- Average income multiple for a loan = 3.63
- Average proportion of household income to service the loan = 17.5%
(Source: UK Finance, August 2017 figures, October 2017 release)