Tag Archives: first-time buyer

First-time buyer demographics have changed

 

The latest report from the English Housing Survey (EHS), shows a shift in first-time buyer demographics: revealing a distinct change in the age, deposit size and source of deposit finance compared to a decade ago.

Highlights of the survey include:

  • One in five (21%) first-time buyers were aged between 35 and 44 years in 2015-16, up from 16% in 2005-06
  • In 2015-16, three-quarters (74%) of first-time buyers were couple households, a marked change from 2005-06 (66%)
  • Over the same period, the proportion of first-time buyer households with dependent children increased from 23% to 37%
  • Two-thirds of first-time buyers pay a deposit up to 20% of the purchase price, 29% getting help from their family (up from 22% ten years ago)

Source: English Housing Survey (2015-16) 

Research paints a different picture of first-time buyers

The EHS research paints a very different picture of the journey that some first-time buyers may go on when compared to ten or twenty years ago. By understanding these changes and the attributed factors, we can see why the knowledge, experience and guidance of mortgage consultants have become more valuable than ever before.

In 1995, around 20% of first-time buyers were aged 16 to 24. They may have raised funds for their deposit on their own, have submitted a single mortgage application, and they may not have had children at the time of purchasing their first home.

Fast forward to the findings from 2016 EHS, and you’ll find that there are fewer youngsters able to afford a house in the 16 to 24 age bracket. First-time buyers could be slipping into the 25+ bracket as it takes longer to save the level of deposit now required for their first home – house price growth has been outpacing income growth for more than twenty years. As a 25+ mortgage applicant, they may also be a couple and have children.

The hard facts

According to the EHS, Londoners are choosing to raise a deposit of up to £94,088 (mean value) to secure a favourable mortgage rate on their first home, with 29% turning to family to help raise funds ­– a 7% increase in a decade.

While working hard, saving even harder and raiding the bank of Mum and Dad, 74% of first-time buyers will have teamed up with another person and 37% will have children before they buy their first home ­­­– 8% and 14% higher respectively since 2006.

The EHS also found that those purchasing their first property were in the two highest income bands, now accounting for nearly two-thirds (66%) of first-time buyers, compared with 58% ten years ago.

How does this affect a mortgage application?

A mortgage consultant needs to take all of the changing demographics and factors into account, and Springtide Capital is no different.

A joint application, an older applicant, a larger mortgage and having children impacts affordability. A joint application, for instance, increases the amount of evidence of income required, but equally, it increases the chances of funding with two incomes instead of one. The age of the applicant and the period in which they require the mortgage is reflected in the affordability of monthly payments, as is the age restrictions and period of mortgage allowed by lenders.

The affordability of funding for a house (prices having outpaced income for many years) and the costs of running a household with children also needs to be considered. All this has to be reviewed by an experienced mortgage consultant, who not only works out the affordability but also the correct lender to suit an individual’s needs – it’s become more of a balancing act.

Henry Knight, Managing Director, Springtide Capital commented: “First-time buyers are an essential cog in the housing market machine: without them, the market slows – they allow existing property owners to release equity and re-invest in the housing market. At Springtide Capital, we pride ourselves on understanding a changing market and identifying which product and lender are suitable for each applicant.”

Register and prepare for a government-backed starter home

 

As the Government gives the green light to construct thousands of new starter homes, many 23-40-year-olds will want to know how to register interest and how the scheme will work.

As an established mortgage broker, Springtide Capital has provided an overview of the new scheme and how to pre-register interest.

What is the new construction plan?

The housing minister, Gavin Barwell, confirmed on 3rd January 2017 that this year will see the first starter homes being built on brownfield sites across the country.

Created to address severe housing shortages in the UK, the new scheme will be for those aged 23-40 and will provide affordable housing at a minimum of 20% less than market value.

The Government has said: “The £1.2 billion Starter Home Land Fund was established in April 2016 to support the acquisition, remediation and de-risking of further suitable land for starter home developments. Some 71 sites across the country have already received investments, including land at: Plymouth, Bury, Basildon, Stockport, Bridgwater, Cinderford, Minehead, Bristol, Trafford, Isle of Wight, South Ribble and Swindon.”

Aimed at helping first-time buyers to get on the housing ladder, this scheme has attracted strong interest from both builders and local councils. The Starter Homes Land Fund has been created to prepare suitable land for building developments, helping to accelerate construction by 2020.

How to register your interest

Based on the new houses being built in 2018, you’ll have a least one year to save and plan your finances.

However, the new homes will be in demand, so it’s advisable to pre-register your interest with New-Homes.co.uk (set-up via the Home Builders Federation) in addition to speaking to several local estate agents to ensure you’re made aware when they become available.

Working with professionals

If you’re considering purchasing your first home, it’s advisable to enlist the help of an experienced mortgage broker.

They will help you to understand whether you can afford the bills, the mortgage required to purchase a property, explain the process and help you to plan financially.

When the time comes, the mortgage broker will match your circumstances to a suitable mortgage lender, complete affordability checks, explain what you’re agreeing to and complete the necessary paperwork with you.

You’ll also need a solicitor, which your estate agent or broker can recommend. Choose carefully, as a good solicitor and mortgage broker will be the key to a stress-free experience.

Budgeting for the move

  • You’ll need to calculate the bills you can expect to pay at the property including food, council tax, utilities and buildings insurance etc.
  • Creating a spreadsheet with all expected bills, current commitments, savings and projected earnings will make it easier for both you and your mortgage broker to understand affordability.
  • You’ll also need to save a deposit for your new home (usually 5%) and allow for stamp duty tax for the purchase of the new property.
  • Finally, consider the cost of the move itself, including solicitor’s fees, mortgage fees (including surveys and valuations carried out) and removal costs. Your mortgage broker will discuss what you need to save for and the fees that can be added to your mortgage.

For more information or to book an appointment with a mortgage broker call 020 3040 4400.

 

 

Source: https://www.gov.uk/government/news/green-light-for-construction-of-thousands-of-new-starter-homes