New government schemes offer help to first time buyers
House prices have risen rapidly over the last year or so going up by 10% in 2021 alone according to the Office for National Statistics. The average house price in the UK now stands at over £275,000 which is £27,000 more than 12 months ago. This has meant that for many people, including first time buyers, it is almost impossible to get on the property ladder. The increase in inflation, rental prices and the cost of living has also made it much harder to save for a deposit. A 10% deposit is generally viewed as the amount to aim for, although some lenders will accept 5%, but the lower the deposit is the higher the mortgage interest rate will be meaning that you will be paying back more over the whole term. So what help is there out there for first-time buyers? Help to buy schemes have proved popular in recent years, but the scheme ends in less than a year on 31st March 2023 and there are now regional caps on the maximum price of a home. With this is mind a new government scheme is being introduced out called First Homes. This scheme offers at least a 30% off the market value of a property, options for shared ownership and a 5% deposit option called Deposit Unlock.
Shared ownership basically means that that you buy a share of the property using a mortgage and you pay rent on the remainder to a landlord (usually a housing association). The minimum share you are able to buy to start with is usually 25% but you have the ability to buy more shares in the house when you can afford it – this is known as staircasing – potentially allowing you to own your house fully one day. The deposit required will be 5% to 10% of the share of the property you are buying, not the full purchase price, making this a much more affordable option for some buyers. There are even some lenders who will accept no deposit for shared ownership. First time buyers with a household income of £80,000 nationwide, or £90,000 in London, are eligible for the First Homes scheme which is the same as shared ownership eligibility. There are price caps for property value set at £250,000 nationwide, or £420,000 in London.
Different housing authorities have differing criteria that must be met in order to take part in this scheme, but pre-requisites tend to be that buyers must live or work in the area currently or have family connections to it. Housing authorities have the ability to increase the discount to 50% or lower the household income required if that suits the region better. The mortgage must be for at least 50% of the purchase value of the property and it should be your main or sole residence. The Deposit Unlock scheme means that you only need 5% deposit for a new build property (generally new builds require a deposit of at least 15% to 20%) and the mortgage rate is better than the standard 95% loan to value mortgage tends to be as the house builder pays to insure the mortgage. Currently only Nationwide and Newcastle building societies offer Deposit Unlock mortgages but it is likely that more lenders will follow shortly. A good mortgage broker will be able to advise on the best options available for your own particular circumstances. A good mortgage broker will be able to advise on the best options available for your own particular circumstances.