Getting on the housing ladder is never easy – and with the current climate it may be harder still.
At Continuum, we are looking at the effect on people ready to get on the housing ladder as first-time buyers.
It could be a good time to buy
The housing market stalled earlier in the year, with lockdown shutting the doors of estate agents and making viewings impossible.
As part of its efforts to kick-start the economy, the government implemented a temporary increase to the stamp duty threshold to £500,000. This has meant that buyers and home movers in England and Northern Ireland will not pay stamp duty on the first £500,000 of the property value, from now up until 31 March 2021.
In Wales and Scotland, buyers will not pay land and buildings transaction fees up to £250,000.
This means that you could save by getting on the property ladder now, rather than later. But it may be more difficult than you bargained for.
Prices are going up
Despite recession and predictions of a collapse in house prices in the wake of Covid (not to mention Brexit) the prices of houses have actually risen. Official figures published by the Office for National Statistics proved that since market reopened after the seven-week lockdown property prices have risen significantly. The average price of a UK home rose by £8,000, or 3.4%, in the year to June to £238,000.
It means that getting the most cost-effective mortgage is more important than ever.
First time mortgages are becoming more difficult
But the problem is that securing the mortgage you need may be more difficult. Despite a surging property market, lenders have become more cautious about lending. Not wanting to expose themselves to risk if house prices fall again, they are demanding a higher contribution from buyers. This is not a problem for existing homeowners who have seen their own equity shoot up, but first-time buyers are seeing the goalposts move as they are suddenly asked to provide up to 20% deposit.
Back in March, first time borrowers could have chosen from hundreds of deals with a 10% deposit. The Times has reported that no high street bank is now offering mortgages for borrowers with a 10% deposit, while even deals for those with a 15% deposit may be disappearing.
Lenders are also being stricter about who they grant mortgages to, with some having already said they won’t consider applications from those on furlough without a firm return to work date.
With prices heading ever higher, and deposits heading up with them, it looks as though for many people the dream of owning their own home is further away than ever.
Getting help to get on the ladder
It is easy enough to apply for a mortgage. You can do it online or call in a bank or building society branch.
But there are two facts that complicate matters.
The first is that if you go direct to a lender, they will discuss your needs and circumstances, and try and find the mortgage that is best for you – but they can only find a solution from their own products.
The second is that your circumstances might not meet the lenders criteria. If you have an income stream that is in any way unusual or potentially affected by the Covid crisis, or if you are looking at buying an out of the ordinary property, they may not be able to help at all.
Your mortgage is probably your biggest ever financial commitment, therefore ensuring you have the right product in place is crucial for your future plans.
The solution is to talk to a Continuum mortgage adviser. Our experts will look at your financial circumstances in detail – and search all the mortgage products on the market, to find the one that really meets your needs. They can access many mortgage products that are not advertised to the general public
It may be harder to get on the housing ladder now – but coming to Continuum might still make it possible.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable Mortgage products or investment strategy, you should seek independent financial advice before embarking on any course of action.
Your home may be repossessed if you do not keep up repayments on your mortgage.
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