New scheme is a real boost for first-time buyers

THE Government-backed scheme to offer firsttime buyers a five-per-cent mortgage will be available on all homes, new or second hand (previous schemes applied to new homes only).

Five-per-cent deposit mortgages were all but withdrawn from the market at the start of the pandemic in spring 2020 with an almost default minimum deposit of 10 per cent (even as high as 15 per cent in the autumn just gone) putting home ownership out of reach for all but the wealthiest first-time buyers. I must admit I found it a scandal that home ownership among the 25- to 34-year-olds plummeted from 69 per cent in 1981 to 36 per cent by 2014, although with certain Government incentives and low interest rates since then, that had risen to 41 per cent by last year, but it’s not enough

With so many young families paying huge sums in rent, who could effortlessly afford to make mortgage repayments on the same property, they haven’t been able to save enough for a 10-per-cent initial mortgage deposit, let alone 15 per cent.

Yet now with these new five-per-cent deposit mortgages, many first-time buyers will be able to afford to buy their first home.

Banks will typically lend between four-and-a-half and five times the gross annual income – this means with a modest five-per-cent deposit many 20 and 30-somethings will now be able to buy their first home.

The five-per-cent deposit mortgages will also be available to current homeowners who don’t have the equity built up in their existing home – thus helping second or third (or more) time buyers as well.

How do both of these changes affect buy-to-let landlords?

I know many of you landlords are adding to your rental portfolio because of the Stamp Duty holiday and with the extension, you too will save some money from it.

The issue of first-time buyer mortgages does mean the demand for private rented accommodation might not be as strong in the coming decade.

Don’t get me wrong, tenant demand will continue to outstrip supply of Newbury rental properties for the foreseeable future, yet the tenant/landlord balance could alter slightly in the medium term. Landlords need to take a long hard look at their properties and ascertain if they are fit for purpose both now and into the 2030s.

Tenants are becoming a lot more demanding of what their rental property offers.

Woodchip wallpaper, avocado green bathroom suites and kitchens fitted in the 1990s (or before) simply won’t cut the mustard any more in the next decade.

The demand from tenants for properties with larger gardens, or the ability to keep pets or an extra reception room/garden office to allow them to enjoy their rented home more and also being able to work from home will ensure greater demand for your rental property.

And the best bit, they will pay handsomely for that in higher rent. n If you are a Newbury homeowner, buyer, tenant or landlord and you want to discuss your options on selling, buying or renting a property in Newbury and the surrounding area, do not hesitate to contact me personally.