First-time buyers: The fightback continues

Throughout the UK, the number of people buying their first home rose again in 2017 for the sixth consecutive year, according to figures from Halifax.

That’s great news, we’ve been championing first-time buyers for years. What makes it especially notable, is that the average deposit required for a first home has almost doubled from £17,740 to £33,339 since 2007.

Unfortunately, for first-time buyers in London and the South East, the picture is not quite so rosy.

The number of first-time buyers in the capital has fallen by more than a quarter (26%) over the past decade.

Meanwhile, deposits in the South East have increased by 157% to £51,457. That might seem high, but it’s still less than half of the average deposit in London, which stands at £112,604!

By comparison, the average first-time buyer property in the North costs £126,437 in total.

So, a deposit in London could buy you a house outright in the North!

With such a huge divide in first-time buyer accessibility across the country, we look at the options available to help you get a foot on the property ladder.

1. Bank of mum and dad (…and grandma and grandad)

Just under half (48%) of first-time buyers expect to receive financial help from their parents or grandparents. (Source: Legal & General)

If you are one of them, it is worth talking to your family early. That way, you can be sure that you can count on their help, as well as knowing exactly how much they are able to contribute and whether it will be given as a gift, or if you are expected to repay some or all of it.

2. Lifetime ISA

If you are between the ages of 18 and 39, a Lifetime ISA is arguably the best vehicle to use when saving for a deposit for your first home.

With a Lifetime ISA, you can deposit a maximum of £4,000 each year, tax-free. The government will then add a 25% bonus on all deposits until you reach 50.

This money can only be withdrawn without penalty, for two purposes:

  • Buying your first home
  • As retirement income (for over 60s)

Taking cash out of your Lifetime ISA for any other reason will result in a 25% penalty, which will remove both your government bonus and approximately 6% of your original deposit.

3. Shared Ownership

Shared ownership schemes allow you to buy a percentage of your home, whilst paying rent on the remainder. You can usually purchase between 25% and 75% of the property and have the option to continue to grow your share until you own it outright.

This arrangement is usually made with a housing association. You might be eligible for Shared Ownership if you:

  • Have a combined household income of less than £80,000 per year (£90,000 in London)
  • Are a first-time buyer, or do not currently own property
  • Current own part of a property, but plan to sell it to buy part of a new home

In London, the Homes for Londeners scheme has been set up to help first-time buyers with a household income of less than £90,000 get onto the property ladder through Shared Ownership.

4. Low-deposit mortgages

Some banks and building societies are now offering 95% and 100% mortgages. These require either a 5% deposit, or no deposit at all. However, many of these types of mortgage will require a guarantor or family member to make their savings available as collateral.

Low-deposit mortgages often have higher interest rates, which lead to increased monthly repayments. So, it might be worth considering asking if you can use your guarantor’s money as a deposit instead, if possible.

5. Help to Buy Equity Loan Scheme

This scheme is supported by the government and offers first-time buyers a loan which is equivalent to 20% of their mortgage. This means that you will only need to provide a 5% deposit and secure a 75% mortgage to own your first home.

The loan is fee-free for the first five years of the mortgage term. For those looking to buy their first home in London, the threshold was increased from 20% to 40% in 2016.

For more information click here.

6. Starter Homes Scheme

The Starter Home scheme was introduced in 2014. It is designed to bring thousands of new homes to the market at a 20% discounted price for first-time buyers.

The first cohort of councils across the country have now begun to work toward the creation of these homes, so be sure to check on the progress of this scheme if you are not planning to buy your first home straight away.

For everything you need to know about buying your first home, check out our First Time Buyer Guide.

For information and advice from a professional, why not get in touch?