FINANCE
just a £5,000 deposit and allows loans of up to 99% on homes up to £500,000 (but excludes apartments and new builds). PRICED OUT Another worry is not being able to buy in a particular area because of high prices, to which the simplest answer might be to move! If you have a job that can easily relocate, or you work from home, then according to Move IQ there are 14 postcode areas where the average house price is under £100,000 (less than a garage in parts of London). The cheapest locations are Bradford BD1, with an average house price of £69,939; Middlesbrough TS1 (£71,998); Grimsby DN31 (£72,574) and Shildon DL4, (£72,604). For example, Rightmove has secondhand apartments and terraced houses in Bradford, Middlesborough and Shildon for less than £40,000, homes in Grimsby for £35,000 and brand new apartments in Bradford from £72,000. If you are tied to a location, check out offers and incentives from developers and schemes such as shared ownership, First Homes or Discount Market Sale. If you are single, could you buy with friends or siblings? You could also think about buying a doer-upper, but remember that mortgage companies are unlikely to lend on a property with issues such as subsidence, damp or a leaking roof – that is why the cheapest homes are usually advertised for cash buyers only.You will need to factor in the time and skills needed for DIY, as well as the cost of materials – projects such as a new boiler or an electrical rewire can be very pricey. RENTING FOREVER? Four out of 10 are worried they will be renting forever, but there is no need to be despondent – if homeownership is your dream, then explore every possibility to make it come true! If you are paying rent, you will probably find you can get on to the shared ownership scheme and buy equity in a new home for around the same price as your rent, with the possibility of buying more shares as you are able.You could secure a 95% or even a 100% mortgage, over as long as 40 years, which might make your dream possible this year, rather than in the distant future.
the self-employed can’t benefit from this). Selling your own clothes or bric-a-brac is not taxable (although you should keep records in case HMRC ever asks). Cut spending – 71% of young people aged 18 to 24 and 75% of those aged 25 to 34 spend more than £1,000 on holidays a year [Statista], and the average Londoner spends £2,600 a year on up to three takeaway meals a week [Ninja Kitchen]! No one wants to live like a monk, but why not see what six months with no non-essential spending could achieve? Check savings – have you opened a Lifetime ISA? If not, you are missing out on up to £1,000 a year of free money! If you are between 18 and 40, open a LISA, put in up to £4,000 each year and the Government will add a 25% bonus up to a maximum of £1,000 a year, in addition to the tax-free interest. The LISA is part of your annual ISA allowance of £20,000, so you could also put a further £16,000 into an ordinary cash ISA, where the interest will be tax free. Cash ISA rates are over 5% at the moment. If you’ve already used up your ISA allowance, review where you put the rest of your savings – if you are earning less than 5% then you could do better! Speak to parents – high on the worry list was not being able to rely on the Bank of Mum and Dad to gift money for a deposit, but not every family will be able (or willing) to give money away. However, it’s worth talking to your family about ways they can help without impoverishing themselves. For example, some lenders allow parents to put money into a savings account that is linked to their child’s mortgage, (called a springboard, offset, savings as security or family mortgage), facilitating a deposit- free loan. As long as the mortgage is paid, the parents keep the money and interest. Similarly, parents can act as a guarantor, or be added to a Joint Borrower Sole Proprietor mortgage, to allow the first time buyer to borrow more. In all these cases, providing the buyer pays their mortgage, there will be no cost to parents. Mortgage options – if you are still struggling to raise a deposit, many lenders offer 95% mortgages, and Skipton has led the way with a 100% mortgage that doesn’t require help from family – its Track Record mortgage is for renters with a good track record.Yorkshire Building Society has also launched its fee-free £5k Deposit Mortgage, a product for first time buyers that requires
EXPERT COMMENT
Getting on the housing ladder is the top priority for many young people, but with both house prices and mortgage rates rising it can be an increasingly hard-to-reach goal. However, using a Lifetime ISA can supercharge your savings and get you closer to your dream. The average house price is £285,000, but if someone is saving for a home they need to factor in rising prices. If prices continue growing at the same pace as they have over the past 40 years the average house price would hit £539,000 in 10 years – so a 10% deposit would be £54,000. While this is a huge sum, using a Lifetime ISA can shave years off your deposit saving and add thousands to your pot. If someone could pay in the full £4,000 Lifetime ISA limit each year they’d generate a pot worth £66,000 after 10 years, having bene ted from £10,000 of free money from the Government plus investment growth at 5% a year. That same amount saved in a standard ISA would be worth around £53,000. The beauty of the Lifetime ISA is that you can double up on contributions and Government bonus if you’re buying with another eligible rst time buyer.
Laura Suter, Director of Personal Finance, AJ Bell
First Time Buyer June/July 2024 123
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