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What does the cost of living crisis mean for first-time buyers?

As we’ve seen in recent months, the cost of living keeps going up. With bills on the rise and the cost of essential purchases going up, we’re looking at how first-time buyers feel about joining the property market.

Over the last year on average, 72% of first-time buyers have been impacted by rising costs, delaying 32% with their decisions to purchase their first properties. That’s according to research from Aldermore.

A further 64% have also reduced their amount of regular savings and are waiting for the financial markets and inflation to reduce before finalising their decisions.

Is there any new support available for first-time buyers?

It is always advisable for first-time buyers to seek professional help.

Utilising a broker and their indispensable knowledge is almost always the best thing for any purchaser to do, particularly if you use a ‘whole of market’ broker such as Agentis. We are able to see the whole mortgage market, specific to individual clients’ needs.

The now defunct Help to Buy Equity Loan Scheme, which was introduced initially in 2013, ended permanently in 2023. This scheme was incredibly popular and allowed first-time buyers to purchase a new build home with a 5% deposit of their own. This was then topped up with a loan of up to a further 20% provided by the government.

Interest-free for the first five years, the equity loan provided much-needed support and allowed many first-time buyers to get onto the ladder.

It is expected that a similar scheme will come into play in 2023, but no such announcement has been made yet.

In the meantime, there are still some options and schemes that first-time buyers can take advantage of if they are correct for their situation.

  • First Homes Scheme

The government is still running the First Homes scheme. This scheme is only available currently in England and is available on new build properties where the developer is taking part in the scheme or if the home being purchased was originally bought through the scheme.

Developers offer these homes to first-time buyers with 30%-50% of the market value taken off the price. Every property that is sold under this scheme is valued independently to make sure the discount is based on the actual market value.

Of course, a deposit is still required for the remainder of the purchase, and restrictions include that the new property cannot cost more than £420,000 in London and £250,000 anywhere else in England.

An application needs to be submitted to the local council and will be checked for eligibility. An appropriate mortgage product also has to be chosen; not all lenders have products that support the scheme.

  • Right to Buy Schemes

Right to Buy Schemes are also still available and most council tenants are able to buy their council homes at a discount. These are applicable if the property is your only or main home, and you are a secure tenant. Details and discounts available are determined by the individual councils and the HM Government’s ‘Own Your Home’ website. Different rules apply for England, Scotland, Wales and Northern Ireland respectively.

Often, you can use the discount provided to fund your deposit, however, similar to other schemes mentioned, not all lenders allow products with this scheme, and some will still require the buyer to have a deposit of their own to put towards the purchase.

  • Shared Ownership Mortgages

Shared Ownership properties are also popular with first-time buyers. This is where the purchaser only purchases a certain percentage of the property with the rest being owned by a housing authority or association.

Shares purchased are normally between 25% and 75% but there are some homes available with the ability to purchase just a 10% share. Properties can be either a new build or an existing property that is being purchased through a shared ownership resale scheme.

A deposit is required which is anything from 5% of the value of the share being purchased. And buyers have the ability to purchase more shares of the property in the future. This is known as ‘staircasing’. As with the above, specialist mortgage products are required for shared ownership properties, and not all lenders offer them.

The remainder of the share owned by the housing authority or association is subject to a rental payment each month, meaning not only will the buyer be paying for their mortgage each month but will also be paying rent each month to the respective authority or association.

This is an extra factor to consider within the affordability of the new mortgage. Properties of shared ownership are almost always leasehold as well, meaning certain restrictions may be applied with changes to the property, such as building extensions or changes to the layout of the property.
If you are a first-time buyer and are looking for expert help and advice for your first property purchase, please give us a call and see how we can help today.

David Mortell

David Mortell

David is Ce(MAP) and Ce(RER) qualified and has 14 years’ experience delivering top-rated mortgage and financial advice.In 2014, David took the plunge and started Agentis Financial & Mortgage Solutions with award-winning mortgage broker, Christine Long. Agentis has now become the brokerage of choice in and around Peterborough. David is also a director at our sister company, Agentis Wealth.