Houses are a nightmare, but there’s loads of support to help make buying more affordable.
If you happen to be born after 2000 you’re probably not on the housing ladder yet.
Gone are the days when you could buy a 3-bed semi for £3,000 and a song (as your grandad never stops telling you). Now, the average house deposit is around £60,000, and the average age of a first-time buyer is 33. Welcome to Generation Rent.
But it’s not all doom and gloom. There are loads of useful schemes which could help you take the step from renting to owning, even if you don’t have a spare £57k rattling around in your back pocket.
Here’s a quick breakdown of what’s out there:
The one where the government puts up to £1k a year in for you
A Lifetime ISA (or LISA if you’re on first-name terms) lets you save up to £4k a year towards your first home or retirement.
The government will add a 25% bonus to whatever you save, up to £1k a year (yep, that’s £1,000 of free money every year in your account).
What’s the catch? Well, you have to use the money you save to buy your first home, or for retirement after you hit 60. And you can only open a LISA if you’re between 18 and 39 (sorry Gen X, but you don’t need the help).
Government 95% mortgage guarantee scheme
The one where you only have to get a 5% deposit together
For loads of first-time buyers, the biggest hurdle is the deposit. So, the government has launched this scheme, which runs until Dec 2023, to help first time buyers (or current homeowners) secure a mortgage with just a 5% deposit to buy a house up to £600,000.
A deposit is how much money you need to pay to buy your new house, and a lender gives you the rest of the money (the mortgage) - we say ‘give’, but you sadly have to pay this money back! It’s a type of loan that you basically repay each month over a number of years.
So, if the house you’re buying is worth £200,000, you only have to pay 5% of that (£10,000) upfront, and the remaining 95% (£190,000) gets lent to you. You repay the £190,000 plus any interest over a number of years (which can be up to 40 years!) *Maths brain freeze*.
No stamp duty for first-time buyers under £425k
The one where you don’t have to pay stamp duty
Did you know property tax is a thing?
It’s called stamp duty, and it’s the tax you pay for buying property or land in the UK. The good news is that for first-time buyers, you don't have to pay anything for property values under £425k (we don’t need that kind of energy in the housing market).
Shared Ownership scheme
The one that’s a cross between buying and renting
The name says it all, really. Through a housing association, you can get a Shared Ownership property, where you partially buy the house, and rent the rest at a reduced rate (don’t worry, you don’t have to share the property, just the ownership).
You’ll then have the option to buy a bigger share of the property when you can afford it. And in the meantime, the cost of maintenance and repairs will be taken care of by the housing association (at least for the first 10 years of ownership). Win-win.
Some final words of wisdom
If you’re thinking about taking the first step on the ladder, that’s great! Just make sure to watch out for a few things:
Smaller deposits mean higher mortgage interest rates, so larger repayments in the long run
Mortgage lending is still limited by affordability (it all comes down to your annual salary), so even if you can save a 5% deposit you may not be able to buy the house you want if your income is too low
And if you’re already there with your deposit (check you out) that’s even better. Here are some tips on what to do next:
Take your time house shopping. Don’t rush and make a bad decision (you can’t return it with tags on like the last 4 jumpers you bought)
Speak to a mortgage broker to find the best deal for you (often advice is free)
And don’t forget to think about the long-term. What if you’ve been saving up for years, but can’t work and have to eat into your savings to meet everyday expenses? Or if you’ve already got a mortgage, what would happen to your house if you couldn’t work due to ill health and struggle to keep up with the regular repayments?
It’s hard enough to get on the property ladder, so once you’re on, you want to make sure you don’t fall off – and income protection insurance can help you do that.
If you do lose balance, income protection replaces a percentage of your income if you fall ill or have an accident and can’t work, so it can help you keep up with your mortgage payments and other bills without dipping into your savings.
Think of it as the suction gloves Tom Cruise wore in Mission Impossible (except you’re on a metaphorical ladder, not a death-defying stunt). Find out more about income protection insurance here.
We've partnered with the experts at Caspian Insurance who can help you to find the right income protection insurance policy based on your personal needs. Click below to find out more.
The housing market can feel like a dumpster fire.
But it’s not impossible to get on the ladder, especially with all the help that’s out there. Just make sure to look around carefully to find the right option for you. Ask for advice if you need it, and make sure that you’re covered for every eventuality.
And who knows? Maybe generation rent will soon become generation buy.