Mortgage rates are expected to come down over the next year, which could make owning a home a possibility for millions more people. Thinking about where to start can be a daunting prospect, but there are an increasing number of ways to save up for a deposit, and get a foothold in the housing market. We spoke to some leading mortgage experts to get their tips for anyone starting out on the journey to owning their own home. The average deposit paid for a first-time buyer is £34,500, according to UK Finance. So the sooner you start saving, the better. A Lifetime ISA (individual savings account) offers 25% bonuses for those who are saving for a first home. For each £4,000 saved in any given tax year, the government will top it up with an extra £1,000. Digital mortgage broker Tembo specialises in helping first-time buyers, and has seen a rise in savers starting young. "If you maxed out your savings allowance from the age of 18 to 30, you could pick up £22,000 in free bonuses," says Tembo chief executive Richard Dana. "Family members can contribute too. But beware that the money can only be withdrawn to fund a first-time home purchase up to the value of £450,000." Those struggling to raise a deposit have now got a broad range of 95% loan-to-value (LTV) deals available, says David Hollingworth from mortgage brokers London & Country. In fact, more low-deposit mortgages are available to choose from than at any time since the financial crisis of 2008,according to new figures. "Yorkshire Building Society offers a £5,000 deposit mortgage which does what it says on the tin and could offer a mortgage equivalent to as much as 99% of the purchase price," says Mr Hollingsworth. "Skipton's Track Record mortgage can offer as much as 100% lending for those that can demonstrate a track record of paying rent that exceeds the mortgage payment." However, small deposit mortgages typically offer higher rates, and may not be suitable for many self-employed homebuyers who may struggle to meet the strict eligibility criteria. Shared ownership has been available in England since the 1980s and enables a first-time buyer to own a "share" in their home of between 25% and 75% of the value. There are similar schemes available in Scotland, Wales and Northern Ireland. You need a small deposit and can take out a mortgage to buy your share and then pay rent to the landlord for the rest. Over time you can increase the amount of the property you own and reduce rental payments. It's known as "staircasing" and the aim is to eventually own your home outright. "Although shared ownership is usually seen as an option for younger, first-time buyers, that is not always the case," says Laura Gaskell, sales manager at shared ownership specialists Snugg Homes. "The average age of a buyer with us is now 48 and we have people who have been homeowners previously. Our advice is to register your interest and regularly check the eligibility criteria." The "Bank of Mum and Dad" might not be an option for some, but there are ways to get help from family members without borrowing any money at all. An "income boost" mortgage (otherwise known as a Joint Borrower Sole Proprietor mortgage) allows a homebuyer to add up to three family members (or in some cases friends) to their mortgage to increase the amount they can borrow from a lender. While the "boosters" are on the mortgage, they are not owners of the home and therefore the buyer's first-time buyer status is not affected. "This is increasingly popular amongst younger first-time buyers who are earlier in their careers and are earning less," says Richard Dana from Tembo. "It's the primary option for families who want to support their children, but might not have the cash available to gift as a deposit, or want to keep hold of cash savings for their retirement or a rainy day." As buyers will be borrowing more than they would qualify for on their own, they should make sure they can afford the repayments. The risk for the "boosters" is that they are jointly liable for the mortgage in the event the buyer is unable to make repayments. Many lenders offer "professional" mortgages which could enable a buyer working in a regulated or accredited profession - such as doctors, architects and accountants - to borrow up to six times their income. Specialist lenders also offer deals to particular professions. For instance, Teachers Building Society works with those in the teaching profession, while Kensington offers a better earnings calculation to NHS staff, police officers, firefighters and teachers. "Given that these career profiles are often more secure, Kensington felt it could be more generous in its approach as long as the mortgage will be affordable," says David Hollingworth. "It can also take account of overtime and income from a second job to help improve the borrowing amount." But he adds: "It's always still important to shop around. Rates on these mortgages can be a little higher, so taking advice on the best overall fit is important."
Five ways for first-time buyers to get on the housing ladder
TruthLens AI Suggested Headline:
"Strategies for First-Time Homebuyers to Enter the Housing Market"
Bbc News
8.0
TruthLens AI Summary
As mortgage rates are anticipated to decrease over the next year, the prospect of homeownership is becoming more attainable for many first-time buyers. The average deposit for a first-time home purchase in the UK stands at approximately £34,500, prompting experts to recommend early saving strategies. One effective option is the Lifetime ISA, which provides a 25% government bonus on savings intended for a first home. For every £4,000 saved annually, buyers receive an additional £1,000, significantly boosting their deposit fund. Digital mortgage broker Tembo highlights the benefits of starting to save early, indicating that young savers could accumulate up to £22,000 in bonuses by the age of 30. Additionally, family members can contribute to these savings, although it is important to remember that funds from the Lifetime ISA can only be withdrawn when purchasing a first home valued up to £450,000. For those struggling with the deposit, the market has seen an increase in 95% loan-to-value deals, with options like Yorkshire Building Society's £5,000 deposit mortgage and Skipton's Track Record mortgage, which allows for up to 100% lending based on rental payment history.
Furthermore, shared ownership schemes provide a practical alternative for first-time buyers. These programs enable individuals to purchase a share of a property, ranging from 25% to 75%, with the ability to gradually increase their ownership through a process called 'staircasing.' Although typically associated with younger buyers, shared ownership is also appealing to those in their late 40s or even individuals who have previously owned homes. Another innovative solution is the 'income boost' mortgage, which permits buyers to include up to three family members on the mortgage without transferring ownership. This approach is particularly beneficial for younger buyers with lower incomes who still seek to enter the housing market. Additionally, specialized mortgages for professionals in regulated fields can enable higher borrowing limits. Lenders like Teachers Building Society and Kensington offer tailored products that consider the unique financial situations of educators and healthcare workers, respectively. As the housing market evolves, it remains crucial for potential buyers to explore various options and seek advice to find the best fit for their financial circumstances.
TruthLens AI Analysis
The article outlines various strategies for first-time homebuyers to enter the housing market, especially in light of anticipated lower mortgage rates. It emphasizes the importance of saving for a deposit and highlights government schemes like the Lifetime ISA that can assist potential buyers. By providing insights from mortgage experts, the article aims to offer practical advice while addressing the current state of the housing market.
Purpose and Audience Perception
This piece aims to empower first-time buyers who may feel overwhelmed by the process of purchasing a home. By presenting various saving strategies and mortgage options, it fosters a sense of hope and possibility. The article is likely targeting younger individuals and families who are currently renting and aspire to own property. The positive tone suggests that homeownership is within reach, reinforcing the belief that the housing market can be navigated successfully.
Transparency and Hidden Agendas
While the article offers helpful information, it also glosses over some challenges associated with lower-deposit mortgages, such as higher interest rates. This omission may lead readers to underestimate the financial implications of these options. Additionally, by focusing on government incentives, the article might downplay broader economic factors affecting housing prices and availability.
Reliability of the Information
The article appears to be grounded in facts, citing statistics from UK Finance and expert opinions from established mortgage brokers. However, the potential for manipulation arises from the selective presentation of information, which highlights optimistic scenarios while downplaying risks.
Impact on Society and Economy
If the advice in this article is widely adopted, it could lead to increased demand in the housing market, potentially driving prices higher. This may result in affordability issues for future buyers. The focus on government incentives might also influence political discussions around housing policy, as the effectiveness of such programs comes under scrutiny.
Target Demographics
The article likely resonates more with younger demographics, particularly millennials and Gen Z, who are beginning to consider homeownership. It appeals to those looking for guidance and reassurance in a competitive housing market.
Market Implications
The information presented could influence real estate markets by increasing interest in low-deposit mortgage options. Stocks related to mortgage lending institutions or real estate companies might see fluctuations in response to shifts in consumer behavior driven by these insights.
Global Relevance
While the article mainly addresses the UK housing market, it reflects broader trends in global real estate, such as the challenges faced by first-time buyers in many countries. The discussion around affordable housing is increasingly relevant in today's socio-economic climate.
The writing style appears straightforward and informative, suggesting that it could have been generated or assisted by AI models focused on news reporting. However, the tone and structure maintain a human-like quality, indicating a blend of human oversight and AI assistance.
In summary, while the article provides valuable insights and strategies for prospective homebuyers, it also carries an undertone of optimism that may not fully reflect the complexities of the housing market. The reliability of the information is bolstered by expert opinions, yet the selective framing could lead to misconceptions about homeownership.