Getting your keys and moving onto that initial rung on the property ladder is one of the biggest steps facing first-time buyers. With rising house prices increasing deposit sizes at a rapid rate, new buyers are struggling to keep up, and the announcement of the stamp duty extension in March has created yet another surge in demand for UK property.

What Help is Out There?

The Spring Budget announcement has reignited the UK property market in many ways. Zoopla’s latest statistics show that demand for houses with three bedrooms increased by 30% in the week following the SDLT extension, becoming one of the highest sought after property types in the market. This new interest is pushing house prices higher, which is great news for existing homeowners across the UK…but what about first-time buyers?

Source: Zoopla

The return of the 95% mortgage

The Chancellor of the Exchequer Rishi Sunak announced on the 3rdMarch that the government will be backing banks who provide 95% mortgages, something that has been sorely lacking on the shelves since the pandemic hit early last year. The RICS Residential Market Survey for March 2021, has witnessed increased interest from new buyers. March showed an increase from February’s 0% to +42% in net balance. One and two-bedroom flats are holding pockets of popularity in areas such as London and the South East, according to Zoopla, which is likely due to first-time buyers who are now more able to seek long-term finance.

Source: Royal Institution of Chartered Surveyors’ (RICS)

Help-to-buy Replacement Scheme

Help-to-buy have several loans available in order to help first-time buyers find their feet on the property ladder. A popular choice when it comes to owning a property outright is the Equity Loan. This scheme allows potential buyers to borrow between 5%-20% (40% in London) of the overall property value, interest free for the first 5 years; giving the buyer time to repay the loan. It can only be used on new build homes from developers registered for this particular help-to-buy scheme. It will be available until 2023, at which time it will be replaced with a new loan scheme that will meet different qualities of application.

’Shared Ownership’ is another help-to-buy scheme available for first time buyers. Unlike the equity loan, shared ownership is not limited to new build properties. It allows you to buy a 25% – 75% stake in your property, and then pay rent on the remaining share. When you are then able to at a later date, you can buy a bigger share, or the remaining share, of your property.

Find out more from help-to-buy here

Lifetime ISA

The lifetime ISA is a government scheme that can provide 25% returns – limited to £1,000 annually – on your savings, but it must only be used for your first home worth £450,000 or less; or as a pension fund.

You can pay in up to £4,000 per year, meaning that after 12 months you would have £5,000 towards your deposit. You can only withdraw funds for a property purchase 12 months after you make your initial payment into the account and when purchasing your property, it will require your conveyancer or solicitor to act for you, as the funds will be paid directly to them.

Find out more about the Lifetime ISA here

First-timers Stamp Duty Deduction

The stamp duty holiday announced in July 2020 has benefited the property market by boosting property transactions that in turn increased property values across the country. With the bar being raised to properties worth over £500,000, many took the opportunity to purchases larger properties than they could originally afford.

On the 30th June, the stamp duty extension was reduced from £500,000 to £250,000. However, this did not affect first-time buyers. Instead, first timers simply reverted back to the original government ruling that they be immune to the Stamp Duty Land Tax charge on properties worth £300,000 or less.

For a property worth between £300,001 – £500,000, the buyers will be charged a reduced rate of 5%.

DIY properties

Another route you may choose when looking to get on the ladder, is buying an older property in need of some TLC. But consider this route carefully and ensure you take into account all elements that will need to be replaced, and the time it will take in order to fully renovate the property.

• Flooring
• Paint
• White goods
• Garden patio
• New boiler or electrics
• A new bathroom or kitchen
• Any additional extensions or conversions

When renovating a property, purchasing materials can be a relatively expensive – especially for premium products. If you’re looking to hire someone to do the work for you however, the addition of manual labour will also increase your overall cost.

If purchasing your materials separately to your builders or workers, make sure you have them delivered in advance, as delays in the work schedule can be costly. Having a contingency in the budget will help reduce any potential stress, should you need to go over your set budget.

Forgotten costs when buying a property

When it comes to buying your first property, there are many financial elements that need to be considered. The biggest financial outgoing will be the deposit for your property, but what other costs will you need to budget for?

Solicitors Fees

You can expect to see the invoice from your solicitor soon after you exchange. This will of course vary from property to property but for new buyers on average in the UK, this cost is estimated to be between (inc. VAT) £850-£1,500

You may also have to pay additional fees for Conveyancing Searches including Local Authority, Water & Property and Environmental.

Moving van

A standard charge for a singular moving van (2 movers) comes to an average of £60 per hour.

This can be difficult to estimate due to circumstances such as the distance the moving company will need to travel, as will added extras such as packing, storage or additional boxes. You should therefore check with a range of companies in your area, to find the average cost for your move.

Furniture

Furnishing costs will always change person-to-person due to a variety of factors. Sofas and dining sets alone can easily cost £2,000+ when buying brand new. To keep the interior on budget, you can sometimes find quality furnishing in second-hand shops.

Garden

Between May 2020 – February 2021, Rightmove stated that ‘garden’ was their most second most searched term, with ‘garage’ coming first. The pandemic is making buyers view property requirements differently, and this may also apply to first time buyers looking to move to commuter towns that include a larger property with a garden, but a longer commute.

Source: National World

For those purchasing a new build property, the property will more than likely not come with a patio. This cost will vary depending on size of the patio and the stones/tiling/decking that you wish to lay. Budgeting a minimum of £1,500 would be a good place to start.

White goods

Whether they’re not included in a new build or need replacing in a second-hand property, this can be a surprise for new buyers who may be unaware of the cost of these products. This can include items such as:

• Washing machine
• Tumble dryer
• Fridge-freezer

When buying larger items such as white goods, it may be a good idea to purchase a longer warranty to ensure you are covered by any potential damage or unforeseen issues.

Insurance

Organising building insurance is not a legal obligation, although it may be a requirement listed by your mortgage provider. Even if it is not requested by your lender, it is a cost that could save you thousands of pounds in the future. You can use comparison sites such as ComparetheMarket.com or GoCompare to find the best option for you.

There are many other costs that make a house a home, from décor to additional storage facilities and whilst these may only be small in comparison to the purchase price of a house, they can easily add up.

Preparing a budget before purchasing can help understand how much you will need before your completion date. Be sure to take into account any savings you may require after this point, such as repaying an equity loan for example.

Managing your funds is the first step to receiving the keys to your first house, as well as being able to make it feel like home.

If you’re looking to purchase your first property, then get in contact today here.