EP30 – Property Paralysis
It has been just under a decade since the infamous house prices crash back in 2008, and yet many millennials are increasingly finding it difficult to get a footing on the property ladder within the UK. This is primarily, but not limited to, the high deposit required to get a mortgage.
In the year to October prices for all buyers rose by 9.9 per cent, with the biggest increase for four years with London values surging by 18.7 per cent to £485,000.
Meaning that for you to get an average priced house in the capital with a 20% deposit you’d need £97,000 for a deposit. This doesn’t include the relevant fees associated with the purchase of a house either.
This essentially marks the biggest rises for new homebuyers in many years, and is currently making that all important dream of homeownership for many is seem more like a dream and even further out of reach in reality.
Help is at hand
But not all hope is lost, as there are various government schemes that can help you buy a home. These include Help to Buy, Right to Buy and Shared Ownership.
Assuming you only have a small deposit, you could be eligible to use the Help to buy scheme:
- Equity Loan scheme:this is available to first-time buyers and existing homeowners who want to buy a ‘new build’ house. The purchase price must be no more than £600,000. Under this scheme, you can borrow 20% of the purchase price interest-free for the first five years as long as you have at least a 5% deposit. If you live in London, you can borrow up to 40% of the purchase price. The scheme is available until 2021.
The Right to Buy is for tenants in England, Wales and Northern Ireland who rent their home from their local council.
It allows tenants who qualify, to buy their home at a discount.
The size of the discount varies depending on where you live and the type of property you want to buy.
Tenants who were living in a council home before it transferred to another landlord such as a housing association, might be eligible to buy their home under the ‘Preserved’ Right to Buy or Right to Acquire schemes.
Shared ownership is where you buy a share of a home from the landlord, who is usually the council or a housing association, and rent the remaining share.
You need a mortgage to pay for your share, which can be between a quarter and three-quarters of the home’s full value.
You then pay a reduced rent on the share you don’t own.
Later you can choose to buy a bigger share in the property up to 100% of its value
This scheme aims to help low and modest income earners buy or rent at a price that’s affordable.
You part buy and part rent the property – mostly for newly built homes but some other properties are included.
There are eligibility criteria based on earnings.
You can’t buy a home on the open market.
The Help to Buy equity loan scheme is a government scheme currently set to run until 2020.
It’s available to first-time buyers as well as homeowners looking to move – but only for newly built homes.
The Starter Home scheme is a new government plan, where 200,000 new build homes are available to first-time buyers under 40 years old with at least 20% off the market price.
The discounted price for these homes should be priced no more than £250,000 outside London, and £450,000 in London.
Why not use this Mortgage affordability calculator to estimate what you can borrow.
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