High rates, houses and the end of Help to Buy

In a world where inflation is on the rise and interest rates are at a 33-year high (yikes!), it’s difficult to imagine that first-time buyers will ever get on the property ladder.

Are you struggling to save for a deposit? Find that you’re navigating the mortgage market without a map?

Sound familiar? Are you trying to figure out if you should rent and save for a deposit, rent long-term or live with parents or relatives? It’s a difficult decision to make. Here’s our take on the situation.

If you’re considering moving out of your family home or on from university or a shared house, striking out and moving into your first home can be daunting – not least because there are so many decisions to juggle about money.

If we look at it purely for monthly outgoings, renting is definitely more expensive. Statista’s latest report tells us that the average UK rent has risen by over £100 in the last year to just under £1,200 per month. Renters in London face the biggest hit to their wages, with average rents at £2,000. An average London salary of £41,000 is a big slice of your pay packet.

And the cost of rent continues to rise sharply. Zoopla’s March 2023 study shows that rents for new lets alone have increased by 11% during the past 12 months and by 20% over the past three years, a whopping rise of £2,220 a year on the average home.

But demand for rental properties still remains high…and far outstrips supply, according to Zoopla.

There are third fewer homes to rent, yet the demand has increased 250% above a five-year average just in the past year. So, with high demand and rent, many home-seekers will wonder whether buying is the safest option.

Many will be stuck between a rock and a hard place: trying to save a decent enough deposit for a home while living with a huge dent in their salary caused by high rental prices. Zoopla’s experts say that 75% of first-time buyers come straight from the rental market.

First-time buyers, unless they are very lucky, will be looking to get a mortgage and/or help to buy a home that suits their pocket, so let’s jump into choosing the best plan for your purse.
 

It’s quite frustrating to learn that mortgage rates for first-time buyers have more than doubled over the past year.

First-time buyers must save for a larger deposit to make their monthly mortgage payments affordable. And with the average first-time buyer deposit at £61,000, that’s a lot of money and time
needed to own your first home.

But don’t despair! Even though the Help to Buy equity loan has ended, there’s no need to think that you can’t get help with buying your first home. Apart from the “Bank of Mum and Dad”, there are many schemes and government initiatives to get you on the property ladder. Take a look at our list to see which one suits you best.

We mentioned the “Bank of Mum and Dad” earlier – well, here’s another way parents could help their children or grandchildren to buy a house: a lifetime mortgage. It’s taken out on the parents’ property and gives them a cash-in-the-bank boost and money to help their family. 

Lifetime mortgages are equity-release mortgages, so there is the risk of negative equity and a possible effect on means-tested benefits, and the house must be sold when it’s time to move out.

There are, of course, so many more mortgages out there – too many to name! – these are just a starting point for you to jump in and take a look for yourself.

And don’t forget - don’t suffer in silence if you struggle to pay your mortgage. There are many more penalties if you don’t talk to your bank or building society than if you approach them. They will help you. They’ll talk you through your options, which might include remortgaging for a long-term solution or a payment holiday (if it’s included in your plan) for a short-term solution to get you back on track.

If you feel like you need more guidance, join us for our FREE half-hour webinar on 12th July at 19:30 BST, where we'll provide expert insights and tips to navigate the mortgage process with confidence. Register here.