Home and dry
Cheap mortgages mean now is the best time in years to be a first-time buyer (unless you live in London)
NEW research indicates it could be now or never for thousands of hopeful first-time home buyers.
A combination of low mortgage rates, rising wages and falling utility bills make now one of the best times to buy a home in 13 years.
Estate agency Hamptons International conducted the ‘ability to buy’ research. Director Fionnuala Earley says: ‘The ability to buy is now better everywhere in the country apart from London.’
Anyone who can get on the ladder should also benefit from further house price inflation. The Centre for Economics and Business Research predicts that house prices will rise by more than 3 per cent next year and by at least 4 per cent in 2017.
The organisation’s data also shows it is important to take a long term view when choosing a first home.
It points to a growing gap between the price of a typical starter home such as a one or two bedroom flat, and a next-step home such as a terraced or semi-detached house.
Nina Skero, the centre’s economist, says: ‘The price gap between a first-time home and a larger family home has rocketed in most regions. For many the rungs of the housing ladder are moving further apart.’
If the gap keeps widening, she says, recent buyers may be marooned on the first rung and unable to upsize.
Fortunately a raft of low deposit mortgage deals mean brave firsttime buyers may be able to stretch their finances and leapfrog the first rung of the housing ladder. Aiming high and buying a ‘stay-in’ home rather than a small starter flat has three main attractions. IF YOUR finances can stretch to a house rather than a flat you will have more control of your home expenses as you will not have management and service charges to pay.
Of course you will not be able to share the cost of a new roof, for example, as you would in a flat – so you must try to put money aside for emergencies.
But as a freeholder you will be the one deciding what gets spent on maintenance. A BIGGER property, possibly with a garage and garden, offers more scope for home improvements.
If you can boost the value of your home early on, the mortgage will become a smaller proportion of the property value – so you should qualify for a lower interest rate when your original loan deal ends. AIMING for the second rung of the housing ladder from the start means you will not waste money in fees when you sell your first home and buy a larger one.
Leapfrogging starter homes will also cut the total you pay in stamp duty costs.
But stretching your finances to the maximum and buying the biggest possible property from the start is risky.
If house prices fall and you put down the minimum five per cent deposit on an expensive property then you will be at greater risk of falling into negative equity – when your home is worth less than your mortgage – than you would be if you put down a ten per cent deposit on a more modest property.
If you stretch to borrow the maximum, your finances will also come under intense pressure when inter- est rates start rising. The best advice irrespective of what kind of home you buy is to get a flexible, low rate loan.
Independent brokers say the best providers for first-time buyers include Nationwide Building Society which levies no application fee and also pays £500 cashback to borrowers with five per cent deposits.
Halifax, the Post Office, TSB, Tesco Bank, Woolwich and Yorkshire Bank and Yorkshire Building Society also offer competitive deals.