2018 began with a surprising pick-up in house price growth, up 0.6% month-on-month with January seeing a ten-month high increase of 3.2 per cent. Even with the wider economy and Brexit developments, the housing market activity is only expected to slow a modest amount.
This is great news for those already enjoying the benefits of home-ownership, but if you’re looking to buy your first home the rising house prices mean you’re going to need a bigger deposit. In fact, deposits have increased 220% in the past two decades in Belfast and a staggering 558% in London, to an average of over £80,000.
This means a typical buyer would take around eight years to save for a deposit rising to around ten years in London, based on saving 15% of take home pay.
Deposits for first time buyers (based on a 20% deposit)
*House prices are around 40% lower in Northern Ireland than in 2007
Help for those struggling to save
Low interest rates, the squeeze on wages and rising inflation have all made it more challenging than ever to save for that all important deposit. At the same time stricter affordability requirements can mean those in the market for their first home may have to save a larger deposit to begin with. Even with predictions of modest growth in the housing marketing in 2018/19 this still means that house prices and therefore deposits will increase.
Help is at hand
The good news is there are options out there for those who struggle to save such a large amount.
Help to Buy: Shared Ownership is available to first-time buyers, those who used to own a home but can’t afford to buy one now, or existing shared owners looking to move. The scheme gives you the chance to buy a share of between 25% and 75% of the home’s value, and you then pay rent on the remaining share.
Help to Buy: Equity Loans are available to first time buyers as well as homeowners looking to move. The home you want to buy must be a new build costing £600,000 or less. The Government will lend you up to 20% of the cost of the home, so you’ll only need a 5% cash deposit and a 75% mortgage to make up the rest.
A home for £1?
Perhaps we might also start to see more initiatives like the one that began in Liverpool back in 2013, where empty, boarded-up houses are offered to sale to first-time buyers who live or work in Liverpool for just £1. If you have the money and resources to do the work required to make the property habitable (and within a certain timeframe) this is certainly an innovative way of bringing rundown areas back to life.
If you’d like advice on buying your first home, we’d love to help.
Your home may be repossessed if you do not keep up repayments on your mortgage.