This short blog was written today at the request of a few readers hope you find this useful it is aimed at those who are considering home ownership
The chances of a young adult on a middle income owning a home in the UK have more than halved in the past 20 years.
New research from the Institute for Fiscal Studies shows how an increase in house prices which is now above income growth has now robbed the some of the younger generation of the ability to own their own home.
This means more of the next generation are increasingly forced to stay at home or rent in the private sector the route to social housing has been reduced with the introduction of the Homelessness Reduction Act which came into force in April 2018. For the first time ever a local authority duties to a homeless person/families is to prevent and relieve homelessness and this can include finding accommodation in the private sector.
You might ask why not rent?
Data from Homelet rental Index provides some surprising information about the current rental market.
- Average rents across the UK rose by 0.9% in August 2018 when compared to the same month a year previously; the average monthly rent is now £947
- Rents in London increased by 1.4% in August 2018 than in the same month of 2017; the average rent in the capital now stands at £1,632 a month
- When London is excluded, the average UK rental value was £786 in August 2018, this is up 1.3% on last year
When renting remember this is not an investment and there is no financial return taking the above figure into account if you were to rent of £947 for a year your total outgoings would be £11,364! This does not your household bills.
What are you options?
You could consider Homeownership the Government has a number of initiatives for 1st time buyers.
Before looking at properties, you need to save for a deposit.
Generally, you need to try to save at least 5% to 20% of the cost of the home you would like. For example, if you want to buy a home costing £150,000, you’ll need to save at least £7,500 (5% of the value of the property).
Saving more than 5% will give you access to a wider range of cheaper mortgages available on the market.
Apart from your monthly mortgage payments, there are others costs to consider:
- Surveyors costs
- Solicitor’s fee
- Removal costs
- Buildings insurance
- Initial furnishing and decorating costs
- Mortgage arrangement and valuation fees; and
- Stamp Duty (Land and buildings Transaction Tax in Scotland, or Land Transaction Tax in Wales).
- First-time-buyers will pay no Stamp Duty on the first £300,000 for properties worth up to £500,000.
Affordable home-buyer schemes to get you on to the property ladder:
The money advice service provides lots of useful information about the government Scheme and the links are attached below.
Several government-backed schemes aim to give home buyers a helping hand onto the property ladder.
If you can use one of these schemes, lenders will still want to ensure you can afford to pay your mortgage.
- Affordable housing schemes.
- Help to Buy scheme: everything you need to know.
- Shared ownership schemes.
What if I am over 55 what hope is there for me?
If you are aged 55 or over, the OPSO scheme in England could help you buy any home that’s for sale on a shared ownership basis (part-rent/part-buy). You could buy a share of your home (between 25% and 75% of the home’s value) and pay rent on the remaining share.
It works in the same way as the general shared ownership scheme, but you can only buy up to 75% of your home. Once you own 75% you won’t have to pay rent on the remaining share.
You could buy a home through the OPSO scheme if you’re aged 55 or over and meet the following criteria:
- your household earns £80,000 a year or less outside London, or your household earns £90,000 a year or less in London
- you are a first-time buyer, you used to own a home but can’t afford to buy one now or are an existing shared owner looking to move.
Only military personnel will be given priority over other groups through government funded shared ownership schemes. However, councils with their own shared ownership home-building programmes may have some priority groups, based on local housing needs.
Remember the choice will be yours to make, whichever choice you make will be the right one for you but just some food for thought