HOUSE prices are higher than they’ve ever been but there is help for first-time buyers if you know where to look.
It now costs an average £224,963 to buy your first home – £890 more than just four weeks ago, Rightmove has revealed.
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Compared to this time last year, first-time buyers are shelling out an extra £4,411 for the average of property bought by first-timers.
And that’s on top of soaring rents.
The most recent stats from the Office for National Statistics showed that in the 12 months to the end of September last year, tenants in England were paying £800 a month on average.
In London the average monthly rent was £1,475 but tenants in the North East paid £525 a month on average.
Tim Bannister, Rightmove’s director of property science, said: “Faced with record rents, buying is still compelling for those first-time buyers who are able to clear the mortgage and deposit hurdles.”
Last month the Bank of England put interest rates up again. The base rate is now 4.25%. Less than 18 months ago, it was 0.1%.
The first interest rate rise – to 0.25% – came in December 2021.
At the time, the average five-year fixed rate mortgage was 2.64%, according to Moneyfacts.
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In March this year, the average rate for a five-year fix was 5% – almost double.
For many who want to buy their own home for the first time, it can seem impossible.
But there are several schemes designed to help you get onto the property ladder.
First Homes
If you’re a first-time buyer, you may be able buy a home for between 30% and 50% less than its market value through the government’s First Homes scheme.
You can buy a new build home from a developer or a property from someone who’s used the scheme before and is now selling.
The First Homes scheme is only available in England and to qualify you have to be 18 or older and a first-time buyer.
You’ll need to be able to get a mortgage for at least half the price of the home.
And you’ll only be able to use the scheme if your total household income is £80,000 or less.
If you’re in London, buyers’ joint income can be a maximum of £90,000.
Shared ownership
You can buy a home through the shared ownership scheme if you can’t afford all of the deposit and mortgage payments for a home that meets your needs.
You buy a share of the property and pay rent to a landlord on the rest.
England, Scotland, Northern Ireland and Wales all have slightly different rules, so check the details carefully.
You can buy a share between 10% and 75% of the home’s full market value and pay rent to the landlord on the rest.
There may also be ground rent and service charges to help maintain common areas shared between you and your neighbours, so factor these in.
You can take out a mortgage to buy your share or pay for it with savings.
You’ll also need to pay a deposit, usually between 5% and 10% of the share you’re buying.
You can buy more of the home later on, when you can afford to.
You’ll pay less rent to the landlord whose share will get smaller.
But watch out for the small print as sometimes you can only buy more of your home in £10,000 chunks.
You’re restricted to buying a new build or from a seller who also bought through shared ownership.
If you have a long-term disability, you may also be able to buy a home that suits your needs such as a ground floor flat.
Another thing you need to consider is that all shared ownership properties are leasehold.
You must check that your ground rents and service charges won’t be put up more than a fixed percentage plus or at the inflation rate.
Mortgage Guarantee Scheme
Available for first-time buyers and those who’ve owned a property before who have a minimum 5% deposit.
It can be used to buy any type of home so long as you don’t pay more than £600,000 for it.
By providing a guarantee that the government will cover some of a lender’s losses if a borrower can’t afford to repay their mortgage and the home is repossessed – more lenders are prepared to lend up to 95%.
There’s a clock ticking on this scheme – it’s due to close at the end of this year.
Lifetime Isa
If you’re saving for a deposit to buy your first home then saving into a Lifetime Isa is a no brainer.
You can save up to £4,000 a year into it and the government will give you a free bonus worth 25% of whatever you save.
If you save the full allowance, that means you’ll get £1,000 a year, every year, for free from the government.
You have to be between 18 and 39 to open a Lisa and you can pay in and get the bonus until you’re 50.
You can have a cash or investment Lisa.
If you withdraw your money before you’re 60, it must be spent on buying your first home.
If you withdraw it for another reason, you will have to pay back 25% of your savings to the government.
Effectively you’re giving back the bonuses.
Help to Build
If you’ve decided to build a new home, you could be eligible to get a Help to Build equity loan from the government.
There are different rules in England, Wales and Scotland so check what’s available for you.
If you’re building a home in Northern Ireland you don’t have access to the scheme.
If you qualify, you can apply for the Help to Build equity loan to pay for land to build on or if you plan to build a new flat on top of an existing building.
If you buy a commercial property and convert it into a home you can also apply and when you knock a property down and build a new home in its place.
You can borrow between 5% and 20% of the land and building costs but you must be able to get a mortgage as well.
Buying the land and the estimated building costs must not be more than £600,000 with building costs capped at £400,000
You can only get an equity loan if you also have a mortgage offer for the home you want to build.
There’s a £1 monthly fee to Homes England to manage the loan and you’ll be charged yearly interest at 1.75% interest after five years.
After six years the amount of interest you pay will go up in line with the consumer price index, plus 2%.
Paying interest does not count towards paying back the equity loan.
Help to Buy – Wales
Help to Buy has ended in England but there is still a scheme in Wales.
You can apply for an equity loan from the government to buy a new build home from a registered builder.
You’ll have to put down at 5% deposit, can borrow up to 20% from the government and get a repayment mortgage for the rest of the purchase price.
Right to Buy
This scheme was famously brought in during the 1980s by then Prime Minister Maggie Thatcher.
It’s still running today and allows most council tenants the right to buy their council house at a discount.
There are different rules for Wales, Scotland and Northern Ireland.
You can make a joint application with up to three family members who’ve lived with you for the past 12 months.
If you rent from a Housing Association you may also have the right to buy it at a discount under the government’s Right to Acquire Scheme.
Deposit Unlock
This lets you buy a new build home from any developer registered with the scheme so long as you have a 5% deposit.
Newcastle Building Society, Nationwide and Accord Mortgages are the only lenders signed up to Deposit Unlock at the moment.
The scheme is only available if you apply through a mortgage broker.
Other ways to buy your first home
Not all the help on offer is from the government.
Some mortgage lenders have designed mortgages specifically for first-time buyers who need a bit of help from family or friends.
Justin Moy, managing director of EHF Mortgages, said first-time buyers who need to borrow a bit more could look at the Helping Hands Scheme from Nationwide.
Most lenders will let you borrow up to around four times your salary but this mortgage will let you borrow more than this, even if you only have a 5% deposit.
Aaron Strutt, product director at Trinity Financial, said: “Some lenders will offer income stretches to boost maximum loan sizes, often up to six times salaries.
“Many buyers do not know about these income stretch schemes because they tend to be available through smaller and more niche lenders.”
With family help, you could borrow 100% of the price you pay for your first home.
Moy said: “Barclays Springboard and The Tipton’s Family Assist scheme will both lend 100% if parents deposit some savings with the lender or are happy to use part of their home as a guarantee.”
Steven Morris, advising director at Advantage Financial Solutions, said borrowers could look at taking a personal loan for the deposit with lenders including Saffron Building Society and Santander offering this as an option.
