Date Published 09 March 2012
Despite the imminent rate rises recently announced by certain major lenders, buying will remain cheaper than renting for the vast majority of the UK population however, it can be really tough to save enough money to buy your first property.
James Gesner Senior Partner of Lesters offers some useful advice on how first time buyers can benefit from the following new schemes which are designed to encourage regular saving for those who want to get on to the housing ladder.
After the problems of the last decade caused by fluctuating house prices, ‘over lending', self-certified mortgages and interest only loans, the major lenders have become much more cautious about who they lend to and how much they are prepared to offer. Lending to the credit-impaired has reduced dramatically; the minimum deposit required to secure a mortgage is now typically in the region of 15% to 20%, with many first time buyers obliged to find in excess of £20,000.
This means that potential buyers need to take every advantage to raise the necessary funds. James suggests that building a good relationship with your local Independent Financial Adviser could help when it comes to a loan application but that does not necessarily mean that they will lend you what you want. Some lenders (such as Nationwide Building Society) are now offering Save To Buy Accounts that allow would-be buyers to devote their tax-free savings allowances towards house buying. This could be worth an additional £1,000 to £2,000 per year.
For some institutions, these new schemes are also linked to preferential arrangements that can mean a lower than normal deposit is required (as little as 5%). The only condition on the saver is that they do need to contribute regularly to the scheme.
Another lender (Halifax) will offer to provide a cash boost to a buyer's account when they move into a new home. First time buyers receive a £600 payment into their savings account if they build their savings balance by £150 for ten out of the twelve months before they apply for a first time buyer mortgage with the bank. To qualify, savers can use any of the bank's savings accounts.
For those who already have access to a suitable deposit, there are some exceptional mortgage deals available. The Council of Mortgage Lenders (CML) said its year-on-year figures improved for the sixth month in a row after its members lent £10.5 billion in January and believes the 24th March deadline for the end of the stamp-duty free period for first-time buyers on properties under £250,000 has boosted activity.
Several lenders are offering rates as little as 3.19% on a five year fixed period, with competitive arrangement fees for up to 75% loan to value. These are unlikely to remain for too long, as continued uncertainties in the Eurozone threaten to tighten access to international funds and push up rates in the second half of the year.
What is clear is that for many first time buyers, their savings behaviour needs to change. There is a factor called ‘Generation Rent', which shows that people who do not yet own their own homes are generally less likely to save (for any objective) than those that do, but is has to start with a clear and firm financial commitment from the buyer.
That's why we offer free advice on the process, what it might cost, what you should do to be in the best position to buy, how long it might take, and some essential tips in choosing the right partners (such as lenders and solicitors).
So why not give us a call and let the local, professional experts give you a helping hand.' Contact James or Karen your local Independent Financial Adviser at Lesters on 0149182400 or 01235 519888