Why now is the perfect time to be a first-time buyer
Financial data firm Defaqto argues that first-time buyers can take advantage of cheap mortgage rates and stalling house prices as well as the Help to Buy ISA scheme, which ends later this year.
Rates on high loan-to-value (LTV) mortgages, which require borrowers to have a small deposit so are popular with first-time purchasers, are at a record low.
The average interest rate on a two-year fixed 95% LTV mortgage has fallen from 3.95% a year ago to 3.23% today, Defaqto data shows.
First-time buyers can also benefit from a weakening housing market.
Nationwide, the UK’s largest building society, last week reported that annual house price growth was just 0.9% in April, marking the fifth straight month of weak house price inflation.
Figures from The Royal Institution of Chartered Surveyors in March show that the number of properties coming onto the market has fallen for the past eight consecutive months.
But Defaqto warns first-time buyers need to hurry if they want to take advantage of the government’s Help to Buy ISA scheme, which closes to new entrants on 30 November 2019.
The scheme, which was specifically designed to help people get on the property ladder, lets savers put away up to £1,200 in the first month and then £200 a month after that, and the government will add 25% tax-free up to a maximum of £3,000 (or £6,000 if two people are buying together).
Savers can continue to save into a Help to Buy ISA until 1 December 2030.
Katie Brain, insight analyst at Defaqto, said: “Buying a home is an expensive undertaking and for many years we have seen that first rung of the property ladder move further out of the reach of first time buyers.
“Now, with stalling house prices and cheaper borrowing, we are entering a period of opportunity for buyers looking to make their first home purchase.
“For those looking to get a mortgage, it is important to do your sums and check exactly what you can afford to borrow. While interest rates are low, an increase of just 1% can add hundreds of pounds to a monthly repayment and thousands to the overall cost of a home.”