Young buyers looking to purchase their first home in 2013 could be faced with a number of challenges. From the colossal deposits required to the cruel mortgage rejection – the game of snakes and property ladders is a hard one to win.
If 2013 is the year that you step onto the property ladder, here are a few useful helpful hints and tips to help you out on your way to the top, whilst avoiding those snakes!
Aspiring home owners
First time buyers should not be put off by the potential pitfalls and setbacks that home ownership can bring. Unlike our European cousins, Germany and France, where the majority of people rent rather than own a property, Britain is still largely a nation of aspiring home owners. Clydesdale and Yorkshire Bank research shows that the nation aspires to own a home rather than stay in a spiral long-term renting.
Almost a third (32%) of those polled said they believe it makes more financial sense to own rather than rent. It can be easy to see why; if homeowners are paying off debt on a property they are free to make amendments to the property, build, transform and develop to improve.
Renters are restricted to the landlord’s requirements and conditions, which could mean making no modifications in any way, shape or form. On top of that, your cash is going straight to the landlord rather than towards your future.
Buying is cheaper than renting
The research shows that nearly a fifth of people think that buying is cheaper than renting and in some cases, it is. Rental rates across England and Wales have now hit a record high, with the average monthly payment being £741!
Further research shows that Brits could save a massive £1,080 a year by purchasing a property rather than renting. Data from property listing site Zoopla.co.uk revealed that buying is cheaper than renting in 90% of the top 50 towns in Britain. Renting in York, Peterborough, Reading and Milton Keynes is significantly more expensive than buying .Only Swansea, Cambridge, Bournemouth, Dundee and Huddersfield were cited as locations where it is actually cheaper to rent rather than buy.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: "Record low interest rates mean we are seeing the cheapest mortgages ever so this has to be good news for borrowers. However, the biggest barrier to home ownership is the deposit as first-time buyers struggle to drum up tens of thousands of pounds to get on the housing ladder.”
Location, location location
The precise location where you plan to buy your property makes a huge difference to what you will pay and the mortgage you need. Typically, the cost of living and property prices are much cheaper in the North of England compared to the South. London is extortionate for property prices as the demand is high and so is the subsequent cost of living. The cost of a 2-bedroom flat in London could potentially buy you a 4-bedroom house in Yorkshire.
Mortgages are dull, disheartening and dreary. They drain eye-wateringly huge sums from your finances, come in all sorts of confusing shapes and sizes and can leave you trapped in a mortgage prison if your property loses value - so why an earth would you want one? Well, the simple fact is that the majority of Brits can’t afford to buy a property outright and the bank will give buyers a rather large loan to do so. This, however, comes at a price.
In order to get hold of a mortgage, first you will need a deposit. The average lender requires a massive 20% deposit in order to grant a mortgage to first time buyers. Not so long ago, before the global economic meltdown left the UK housing market in smithereens, mortgage lenders were happy to ask for just 10% or even 5% , allowing buyers to snap up property more freely. Now, first time buyers face a decade of saving just to raise enough cash for the high deposits that lenders ask for.
A report from the Building Societies Association laid bare the burdens that first time buyers face. A quarter of those surveyed said it would take at least 10 years of saving to raise a deposit. Before the 2008 credit crunch, 69% of first time buyers managed to save a deposit in three years, now only 4% have done so.
Homeownership is still attainable and there are some mortgages on the market which only require 10% or less, as part of a government scheme. It’s not all doom and gloom as property prices fall, the economy is getting stronger (which means providers will reduce lending restrictions) and you can compare mortgages with MoneyExpert.