Recent research suggests that it can now take up to 18 years for a person to save up for a deposit on their first home – no wonder so many young people turn to the bank of mum and dad to help them get on the property ladder! But the government is trying to help, with several schemes in place to assist with saving for a deposit. Also, there are many mortgage options available to first-time buyers which can make the process of buying a home seem a lot less daunting:
In December 2015, the government introduced the Help-to-Buy ISA. This is a savings account designed to help first-time buyers to save for a deposit. The scheme allows you to save up to £200 per month, although you can kick-start your savings with a lump sum of up to £1,200.
When you withdraw your savings to purchase your first property, you receive a 25% boost to your savings from the government, receiving up to £3,000 (on a £12,000 balance). There is a maximum property purchase price of £250,000 (or £450,000 if you’re buying in London).
Recent figures show that the Help-to-Buy ISA helped in almost 170,000 property purchases between December 2015 and June 2018.
However, from November 2019 the scheme is set to change with the introduction of the Lifetime ISA and changes to the maximum property purchase price. You can find details of the upcoming changes in our “How is Help-to-Buy Changing?” article.
Under the Help-to-Buy loan scheme, the government lends you up to 20% of the cost of a newly built property (40% if you’re buying in London) – so you can get a 75% LTV mortgage with only a 5% deposit. Even better, you’re charged no interest on the loan for the first five years.
According to the latest report, the government has provided £9.9bn in Help-to-Buy equity loans since the scheme began in April 2013. Almost 184,000 properties have been bought with these loans in England, with first-time buyers accounting for 81% of those purchases.
In the year to 30 June 2018, the number of first-time buyers purchasing properties under the Help-to-Buy loan scheme increased by 16% compared with the previous year, showing a major increase in its popularity with young people.
The shared-ownership scheme allows you to purchase between 25% and 75% of a property and pay rent on the rest of it. Homes being offered under this scheme are usually new-builds or those being resold by housing associations. Over time, you can purchase more of the property, increasing your share until you own 100% of it.
In England, you’re required to be a first-time buyer or someone who used to own but can't afford to now. Your annual household income has to be below £80,000, (£90,000 if you’re in London).
It is estimated that 200,000 UK households live in shared-ownership properties.
In 2017’s budget, it was announced that stamp duty (the tax applied when people buy a property above a certain value) would be scrapped for first-time buyers. This was extended to include shared-ownership properties last year (2018). HMRC estimates that more than 180,500 buyers have received the tax relief so far.
The shared-ownership scheme does have some risks. Mainly the fact that until you own 100% of the property, you’re seen as a tenant in law. This means that you could lose your property if you fail to keep up with rental payments. You’re usually also required to pay a maintenance or service charge on the entire value of the property, which could potentially be quite expensive.
Back in 2014, the government announced the starter-homes initiative. The plan is to build new homes and offer a 20% discount to first-time buyers between the ages of 23 and 40.
Construction on these starter homes is yet to begin, but when it does, they’ll mostly be on brownfield sites – land previously used for commercial or industrial purposes.
To be eligible for the discount, you’ll need a household income of under £80,000 (£90,000 if you’re buying in London).
On the starter-home initiative, housing minister Kit Malthouse has said: "Starter homes are part of this mission to build more, better, faster but it's important we get them right. We are working with the industry on the next steps as we move forward with development."
In addition to these government schemes, there are several mortgage options which can make it easier for you when buying your first property. From multiple-proprietor mortgages to gifted deposits, you can find out about all of the available options in our “Mortgage Options for First-Time Buyers” article.
If you’d like to discuss your options for getting a mortgage, you can speak to one of our friendly expert advisors, who will be happy to help you find the most affordable solution, usually at no extra cost. Visit our “Contact Us” page for details on how you can get in touch.