Practical ways to help first time buyers in the UK

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Longer fixed rate mortgages, more affordable housing and a less stringent mortgage criteria would help first time buyers get onto the housing ladder, it is suggested.

Although recent figures show the number of first time buyers has reached its highest level in a decade, there’s still a lot to be done to help those who are struggling to purchase their first home.

According to the National Association of Estate Agents (NAEA) first time buyers are holding off making offers as they want to maximise their budgets to make the most of the stamp duty reform which means most will not pay the property tax.

Now the NAEA has put forward some ideas that could help them. It points out that although more lenders have introduced 95% LTV mortgages, the fixed rate periods are low, and interest rates are high.

In a new report it points out that first time buyers need to save £33,000 on average for a deposit for their first home, so anything that brings the overall cost down is needed. It argues that access to mortgage products that give them affordable monthly repayments, a longer fixed rate, but don’t require a huge sum of money up front would boost their chances.

It also points out that keeping the market moving is not just about first time buyers as buyers and sellers further up the property ladder also have issues. For example, there are first time sellers who cannot afford to move up the housing ladder and they are effectively blocking first time buyers.

Offering incentives to those at all ends of the market will mean more suitable properties for first time buyer for sale and it is the imbalance of supply and demand that is keeping house prices high, pushing home ownership out of reach for many.

The NAEA found that many agents believe that more affordable housing is the key to helping first time buyers enter the market. Some 58% of member agents said that until the Government fulfils its house building promises, the situation will not improve.

It explains that although the stamp duty relief for first time buyers has lowered the associated costs of buying a home, there are many other additional costs which put a financial strain for those buying their first home.

Agents support a number of suggestions such as discounted surveyor costs and a form of grant to subsidise solicitors’ fees as well as giving first time buyers the option to borrow additional funds from their mortgage lender to cover these costs.

Overall the NAEA says that to help first time buyers lenders need to approach their criteria differently. Those who are self-employed, or work as contractors often find it hard to meet lending regulation and can be required to produce three years of accounts to prove they earned what they claimed, which makes the process stressful and feel impossible.

Furthermore, for aspiring first time buyers who are currently renting, proving they can successfully pay their rent is not sufficient to make them eligible for mortgage repayments. There is a call for lenders to be able to take more sources into account when reviewing mortgage applications.

‘The Government’s announcement to abolish stamp duty for first time buyers has helped buyers feel like the process is more affordable. They are struggling, particularly when it comes to saving for a deposit, and this needs to be addressed,’ said Mark Hayward, NAEA chief executive.

‘However, first time buyers are being practical. Since the stamp duty reforms we have seen evidence that outside of London in particular, they are delaying their search until they have more money saved, in order to purchase a bigger property. This means they’ll be able to stay in the property for longer, making the most of the stamp duty saving and, helping their money go even further,’ he added.

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Written by: Houseladder