The recent base rate cut has reintroduced a measure of confidence to the housing market, but times are still tough for first-time buyers, says the Mortgage Advice Bureau (MAB), one of the UKs leading mortgage brokers.The April rise in the base level of Stamp Duty to £120,000 was intended to make house purchasing more affordable, but with government figures showing the average purchase price for first-time buyers is now an astonishing £138,679*, the benefits in many areas are negligible. With average earnings for full time employees now £26,989** per year, traditional mortgage offers are going to leave a substantial shortfall.
While MAB would not recommend that first-time buyers stretch themselves too far in their desire to purchase their first home, there are a number of factors that can help make buying a property more affordable. MAB’s top tips include:
Save a substantial deposit
Maintain a clean credit record
Consider buying with a friend/sibling
Plan to get a lodger
Be prepared to make sacrifices on location or size
Opt for a fixed rate
Investigate affordability
Stay on good terms with parents
Shared ownership
Consider profession-specific mortgage options
Brian Murphy, lending manager at Mortgage Advice Bureau comments: “First-time buyers form a vital group of homebuyers, and lenders are keen to attract their business.Although the prospect of getting on the housing ladder may appear daunting, there are many opportunities for first-time buyers to ease the buying process.
“Finding the most appropriate mortgage can make all the difference.To broaden their options, the best thing a first-time buyer can do is try and save as large a deposit as possible, as this will provide access to a wider variety of cheaper rate mortgages.
“Many lenders will increase the standard multiples if a buyer opts for a fixed rate – the longer the rate is fixed the more they will be prepared to lend. Buyers can also investigate extending the term of the mortgage, which can make payments more affordable. Some lenders will consider offering a mortgage on an affordability basis if the buyer is already paying the equivalent monthly payments in rent. Similarly, if a buyer is intending to find a lodger, lenders may take the potential rental income into account.
“There are other ways of getting on the ladder.Involving other people can pay dividends: buying with friends or siblings can be a useful way of getting a foot on the housing ladder, especially as some lenders offer enhanced multiples for joint applicants. Parents can also help the first-time buyer in a number of ways, for example by acting as guarantors on the mortgage or offsetting their savings against the mortgage, thereby reducing interest repayments.
“Many lenders offer enhanced mortgage deals for young professionals who expect their income to increase dramatically over the next few years.Key workers could be eligible for the Government’s Key Worker Living Scheme, which offers help into affordable housing through a variety of regional schemes, often involving shared ownership or subsidised loans.
“First-time buyers may have to make some compromises in terms of space or location when purchasing their property, and may not be able to start off in their dream home.It is essential that first-time buyers should not overstretch themselves, and we emphasise the importance of independent financial advice to ensure the best options for the individual.”
