In the last 2 years we have seen an unprecedented rise in house prices thanks to increased demand and low supply.
From the first covid lockdown from March-May 2020 when so many of us realised that our homes no longer worked for us, to the temporary stamp duty tax reduction from July 2020 – September 2021 which saw buyers take advantage of hefty savings of up to £15,000, the UK population has been on the move in a big way. But in a crowded marketplace which was already experiencing a lack of affordable housing options there are only so many properties to go around, particularly larger family homes with gardens and countryside or coast on the doorstep i.e., the holy grail.
As such, despite average annual UK house price rises falling slightly from a high of 13.6% in June 2021 to 9.6% in January 2022, these budget busting prices are seeing many new and first time buyers priced out of the market before they have even had chance to start saving. Not that saving is possible for many of us right now as we are in the midst of a significant cost of living crisis to boot!
So, if you are desperate to get on the property ladder and want to consider your options, here are our top five tips for doing so even when it feels like an impossible dream.
Start looking at ways to cut your living costs and up your ability to save ASAP.
With private rental costs rising at a record rate in the past 12 months, anyone looking to set aside money for a deposit on a new home whilst also covering their spiralling living costs is stuck between a rock and a hard place.
If you landlord is proposing to up your monthly rent, have a look at comparative rental prices in the area and suggest a compromise on the price increase. Alternatively, if you think they are being unrealistic, look into other options so you can hand in your notice. Finding new tenants and re-letting the property is likely to cost them upfront and it will take them a while to recoup this money from the rent increase so don’t be afraid to speak up for yourself.
It might not be your preferred option but moving in with family or friends temporarily or looking at a flat share with likeminded people in a different location can also save you a significant amount of money and top up that deposit pot much more quickly.
Do your research and be realistic about what your budget will actually get you.
If the price of properties in your preferred location are significantly more expensive than your budget will allow, don’t wait around holding out hope that someone will accidentally undervalue their property so that you can snap up your dream home.
Many of us have continued with a flexible working approach since the start of the pandemic which means we aren’t chained to an office desk 9 to 5, Monday to Friday. This means you should be able to widen that search area and you may be pleasantly surprised with how far your budget will go outside of your preferred locations. With so many of us on the move, you may be able to take advantage of the prices in an up-and-coming area before it becomes more established. Look into planned developments for housing, transport and leisure facilities locally as these are all things which can increase an area’s appeal.
Take advantage of any government incentives for which you may qualify.
If you are a first-time buyer, there are a number of incentives available to help you get on the property ladder such as a Help to Buy Equity Loan or a Lifetime ISA to save for your new home which includes a government contribution of 25% (up to a maximum of £1,000 per year).
The First Home Scheme in England launched in 2021 and offers an impressive 30-50% discount on property purchases for first-time buyers and key workers who can get a mortgage loan for half of the property and have a household income of £80,000 or less (£90,000 in London). To qualify for the scheme, the property must be a new-build home or a home you buy from someone else who originally bought it as part of the scheme. To find out more about how the schemes works and the process for applying, head to https://www.gov.uk/first-homes-scheme
As of 22 November 2017, first-time buyers in England, Wales and Northern Ireland are also entitled to relief on stamp duty tax which means they are exempt from stamp duty on properties of £300,000 or less and pay a reduced rate of 5% on any amount over £300,000 (up to £500,000) for properties priced above £300,000.
Even if you are not a first-time buyer, you may still be able to benefit from other incentives such as the Shared Ownership Scheme, and if you are living in a council or housing association home you may be eligible to purchase the property.
Think about the option of buying with someone else.
If you don’t qualify for any of the government incentives above and there aren’t any suitable shared ownership properties in your area, buying with a family member or acquaintance can get you onto the property ladder much quicker than if you go it alone.
If you buy a home with someone, you will need to register yourselves with the Land Registry, Registers of Scotland or the Land and Property Services (Northern Ireland) as ‘joint tenants’ or ‘tenants in common’.
If you are joint tenants, you have equal rights to the property and when one owner dies, the other becomes the full owner of the home. If you are tenants in common you can own a different percentage of the property and leave your share of the property to another person(s) in your will. Your ability to resell the property at a later date when another owner is less keen can also be easier as tenants in common. As such, this option is best when it comes to buying a home with a friend or family member rather than a spouse or life partner.
Whichever option you choose though, always make sure you do your homework before putting pen to paper when you buy with someone else to avoid any awkwardness or someone losing out.
Alternatively, if you are in the fortunate position where parents or other family members can help you out with the purchase without becoming a co-owner there are a number of options such as the contribution of a lump sum gift, a loan or an offset mortgage whereby family members use some of the equity in their own home to help with your purchase. However, all of these options can have their drawbacks, so always ensure that you seek the appropriate financial and legal advice from a mortgage advisor and solicitor before you proceed and make sure everything is in writing to avoid any confusion down the line.
Make a mortgage advisor your new best friend
With both inflation and interest rates on the rise, you need to know where to look to find the right option for you since there are a vast range of mortgage lenders out there with a broad range of options available. If you are self-employed or have complicated financial arrangements a mortgage advisor is a necessity for getting the best deal you can on the maximum loan amount that your budget will allow.
Many mortgage advisors offer an affordable flat-rate fee and referral incentives so speak to friends and family who have bought homes recently for recommendations.