With an increase in 95% mortgages now available from main stream lenders, as well as more government funding available as a result of the Chancellors Autumn Statement, 2016 could be a great time for first timers to get onto the property ladder and potentially enjoy a further uplift in house prices.
Property expert and editor, Lynda Clark, believes that with house prices having risen by 6.1% in 2015 and predictions of a similar rise in 2016, it's only the threat of interest rates rising towards the end of next year that add an air of caution to her bold message.
Here's why;
• Shared ownership – extra government funding means that shared ownership has been extended and is now available to 175,000 more households. This means that more first time buyers can purchase between a 25% and 75% share of a property and pay rent on the remaining amount.
• Help to Buy - The government scheme allows homebuyers to secure a brand new home with a 5% deposit with access to more affordable lending rates thanks to an equity loan. Those in London can now borrow up to 40 % of the value of the property while other buyers can expect to borrow 20%. It's a great scheme and has already helped 130,0000 people move on to or up the housing ladder.
• Starter Homes – The government will fund a 20% price reduction for 200,000 new homes built for first time buyers. They are only open to first-time buyers under the age of 40 and on homes where the discounted price is less than £250,000 outside London and £450,000 in London.
• Return of 95% mortgages - For those homebuyers who don't necessarily want to buy a newly built home, the good news is that 2015 saw the return of many 95% mortgages. Obviously lending rates will vary at this level but first time buyers with a lower deposit will now be much more likely to find a mortgage.
• Buyer confidence is high - which means the market is moving. A moving market is great for first time buyers who are not caught up in a chain making them an appealing buyer. As a result first time buyers will be in a better bargaining position than someone with a property to sell.
• Help to Buy ISA - even for those buyers not quite ready to buy this year the recent launch of the Help to Buy ISA is a great way to start saving. Over the next four years first time buyers could enjoy a boost of £1 for every £4 put away until a combined total of £15,000 is saved.
Even with the threat of interest rates expected to potentially increase towards the end of the year, Lynda still feels that as long as first time buyers don't overstretch themselves financially from the outset, they will still benefit from homeownership.
She says: “Obviously we don't know what is going to happen with interest rates and a potential increase has been looming in the background for some time now. However as long as buyers make sensible decisions and factor in a small increase in monthly repayments, they should be able to manage this in the event of an increase occurring.”
Furthermore, with a prediction that private rent will further increase as a result of recent increased stamp duty taxes for buy to let landlords, Lynda feels that first time buyers will still be better off owning.
It's very unlikely that landlords will just accept this extra cost and instead will find ways to recover their loss – most likely in the form of an increase in rent.” adds Lynda. “As private rents have already risen at quite a dramatic rate over the last few years, more and more we are seeing that those who escape the rental trap and make it onto the ladder are now paying much less in a monthly mortgage repayments.
2016 is an exciting time for first time buyers to take control of their finances and discover what opportunities are available to them. There are a great number of really useful buying schemes now available which are making homeownership a much more affordable option. Crucially getting onto the housing ladder is now a real choice for thousands more potential homebuyers and so 2016 will definitely a good time to find out more.”
