First-time buyers reality check
Maybe first-time buyers need not discount 2021. With a little help, it could actually be the year of the novice purchaser. Let’s be honest, not everyone can (or will) become a homeowner in 2021. That doesn’t mean home owning prospects should be written off though.
Maybe first-time buyers need not discount 2021. With a little help, it could actually be the year of the novice purchaser.
Let’s be honest, not everyone can (or will) become a homeowner in 2021. That doesn’t mean home owning prospects should be written off though. In fact, 50% of all property purchases in 2020 were by first-time buyers, despite a pandemic, furlough and associated financial implications. The same could be true this year.
First-time buyers have exclusive rights to Help to Buy: the Government’s Help to Buy scheme will apply exclusively to first-time buyers between 1st April 2021 and April 2023. The initiative allows those buying their first home to do so with a low 5% deposit, with 20% coming from a Government equity loan and 75% provided by a mortgage. First-time buyers should note that they’re only able to buy new build homes using Help to Buy, and there will be new fixed ‘regional full purchase price caps’ that limit the value of properties bought, depending on where they are in the country.
Moving miles for the right home: recent research by Zoopla found 77% of first-time buyers don't purchase in the same area as their parents, with 45% moving more than 20 miles away.
5% deposit mortgages are coming back...
…we’re just not sure when. The Prime Minister announced the return of 95% loan-to-value mortgages (where you need a deposit of just 5%) in October 2020 but there’s no sign of the product yet. What we do know is around 2 million first-timers will benefit, with hope that the new home loans - with long-term fixed rates for added reassurance - will be made available at some point during 2021.
Not every first-time buyer is a twenty-something: today’s first-time buyers are less likely to be moving straight out of the family home and more likely to have spent years in rented accommodation first. The result is a 21% rise in the age of the UK’s first-timer since 2007, as reported by money.co.uk. Today’s first-time buyer’s average age will be 30 – 34.
You may be able to use cryptocurrency as a deposit: if your wealth isn’t invested in property, where is it? According to Maria Harris, a Director at Digital Cat Consultancy, those of average first-time buyer age may have ploughed their money into Bitcoin and not bricks and mortar. In fact, the biggest holders of Bitcoin are 35–44-year-olds, perhaps explaining why they’re having trouble raising a property deposit. That could all change, however, as our mortgage system is slowly switching on to the idea of alternatives to traditional cash. Already the Nationwide will ‘generally’ accept cryptocurrency as a deposit.
Stamp duty – one to watch
With the current stamp duty holiday ending, old bands set to return on 1st April 2021 and a Budget due in early March, all eyes are on the Chancellor. His next move is speculated to be a slight tinkering of stamp duty thresholds that may specifically benefit first-time buyers. One forecast predicts the ‘zero’ rate threshold will rise from £125,000 to £300,000, so make a note to watch Rishi Sunak take the stand on 3rd March.
Shared ownership made easier: You may not know that 2021 is the year you can buy in for less. The minimum portion of a shared ownership property a buyer can purchase has been lowered from 25% to 10%, making it easier to get on the property ladder with a smaller outlay. In addition, increasing the share a resident owns over time – known as ‘staircasing’ - has been made more accessible, with shares now available in 1% increments, instead of 10%.
Not every first-time buyer is poor: it slightly blew our minds when we heard that more than half of first-time buyers in Westminster, Hammersmith & Fulham and Sevenoaks spent more than £1 million on their first property. The research by agent Hamptons International reveals that not all property novices are penniless.
If you’re looking to buy your first home and would like unbiased opinion on what to buy, then contact the Allen Residential Sales department on 01761 412300 and we can chat further
