First-time buyers back, many need help
More first-time buyers are now back in with a chance of securing a home of their own and the Government’s LISA scheme is helping them save for a deposit. Sharon Dale reports.
THERE are rumours that the Government is planning a new version of the Help to Buy equity loan scheme as part of its next election manifesto. The scheme helped first-time buyers to purchase a new-build property with a five per cent deposit and an equity loan from the Government of up to 20 per cent of the property’s value to be paid back interest-free over five years.
Whether an altered version appears or not only time will tell. Housebuilders will certainly be hoping so as will many would-be first-time buyers who need all the help they can get, though there has been criticism of Help to Buy as many believe it pushed up the price of newly-built homes such was the demand.
For now, it’s a question of saving for a deposit and the Government is still offering help via a Lifetime ISA, aka LISA.
This is a generous cash incentive to those aged 18-39 saving for their first home and the maximum eligible property value is £450,000.
You can save up to £4,000 each tax year into a LISA and the Government will add a 25 per cent bonus on top. That equals £1,000 of free money each year, along with interest on whatever you save and this is all tax-free.
You will need to wait at least a year to claim your bonus and if you draw the money out before for anything other than buying a home you will have to pay a government penalty of 25 per cent.
Martin Lewis and the Money Saving Expert team are lobbying the Government to raise the LISA’s maximum property value in line with house price inflation, or to allow those who end up buying a property costing more to get their money out of a LISA without penalty.
You can use your Lifetime ISA to buy a home with another person regardless of whether or not they are also a first-time buyer.
While mortgage interest rates have risen, estate agents are seeing more people trying to get onto the property ladder now that the housing market has calmed.
The cost of rents is also playing a part in the decision to buy as they are up by an average of 11 per cent year-on-year and still rising. It is now less expensive to pay a mortgage than rent in most areas.
For those buyers wondering whether to wait and see if house prices fall further, Zoopla’s latest market report says that house price inflation continues to slow but a major price re-correction remains a very low probability.
Its analysts believe that if current trends continue, UK house price growth will dip by one per cent by the end of the year as the ongoing repricing of housing continues.
They add that greater realism amongst sellers is supporting improving sales numbers with one in four homes available to buy in March 2023 registering an asking price reduction, a level that is lower
than earlier this year. As for choice, Zoopla says that the stock of homes for sale continues to expand and is now two thirds higher than this time last year.
Buyer demand for property remains 14 per cent higher than 2019, pre-pandemic but 42 per cent lower than levels seen in March last year before the unprecedented boom period came to an end.
While average house price growth has slowed to three per cent
between March 2022 and March 2023, Zoopla says that areas with easy access to cities are out-performing this figure and are averaging year-on-year increases of over five per cent.
They include Oldham, near Manchester, Wolverhampton, near Birmingham, and Selby, which is near to both Leeds and York.
Road and rail links are a big draw for those moving to the Selby area, which has quick and easy access to the A1, M62 and M18. The drive to York and Leeds takes half an hour as does the train service. You can also get a direct train from Selby to London Kings Cross that takes just over two hours.
Commenting on the latest report, Richard Donnell, executive director at Zoopla, says: “We expect firsttime buyers to have another strong year in 2023. They need more income to buy but are starting to look for smaller homes and get away from rapid growth in rents.”
Mark Manning, managing director at Manning Stainton, says: “The overall numbers of buyers searching may have fallen since a year ago but deeper analysis shows that when comparing with a more ‘normal market’ such as that of 2019 there is little change, particularly in first-time buyers who are out in numbers searching for that first step on the ladder.
“The increasing cost of finance affects those looking for the next buy-to-let and the lack of options for those looking to downsize remains a key concern.”
He adds: “The average sale price on offers agreed in 2023 indicate we will see very little change in the average price of property as we move into the summer.”