There’s never been a better time for first-time buyers to make their move and get a foot on the property ladder.
Interest rates for those who have smaller 10% deposits are at an eight-year low, dipping below 4% with HSBC’s two-year discount deal.
One and two-bedroom properties are at their most affordable since 2007, at an average £153,337, while rents keep soaring. And with the last few months of the Stamp Duty holiday for homes worth less than £250,000, which will revert back to the lower £125,000 figure in March 2012, now really could be the ideal time to go house-hunting.
However, there is still one fly in the ointment – persuading a lender to cough up and give you the money that you need.
As tough times continue, banks are cracking down on who they will risk lending to. But they are realising the need for fresh, new buyers to kick-start the property market and are now offering more and more deals that are aimed at first-time buyers with lower deposits. And they are beginning to think more sensibly, encouraging better money management with schemes that go back to the good old days of saving up your deposit, proving you are reliable and can make regular payments before you apply for credit.
Andrew Hagger, from Moneynet.co.uk, says: “It’s good to see that lenders are incentivising people to save regularly for a deposit on their first home – it helps prove to both parties that they are capable of being able to afford the monthly mortgage repayments.
He adds: “With the cost of renting reaching record levels, it makes sense to consider home ownership as an alternative, particularly as rates for those with lower deposits keep falling.”
CASE STUDY
Rob and Nicola Tilbury feel positive about the future as they have started saving towards the deposit for their first family home. They’ve set up savings account with Nationwide, hoping this will help boost their chances of getting a mortgage.
“We took out a Save to Buy account to make us put something away each month and because of the chance to get a mortgage with just a 5% deposit,” says Rob, 26.
The couple, from Barnton in Cheshire, who have two children Alexander, two, and week-old William, hope to have saved the deposit in the next 18 months.
They are going to combine all of their savings into this account so they can get the maximum bonus of £1,000 cashback, which the Save to Buy account offers to those who reach more than £10,000 in savings and who take out a Nationwide mortgage.
“We are just saving the minimum of £50 a month at the moment as things are a bit tight with the arrival of William but we will top this up with anything extra we have and raise the amount as soon as we can afford to. “We are currently renting and feel like we are throwing £600 a month away. We want our own place and to invest in our children’s future. “This savings scheme is just what we needed. It is a great way to encourage people to save and get as much as they can towards the deposit for a home. It’s tough to get going saving at the moment so we need a bit of a push.”
HOW TO BOOST YOUR CHANCES OF GETTING THAT MORTGAGE
If you’re ready to make your move, here’s our guide to help you raise the cash you need to buy.
1 Check your credit file
Find out what lenders will discover about you, so you know there are no nasties lurking around before you apply for a mortgage. There are three main credit-reference agencies: Experian, Equifax and Callcredit. You can get a copy of your credit report from any of them for a small fee – most of them let you sign up online for a free trial. Visit: www.experian.co.uk or www.equifax.co.uk or www.callcredit.co.uk.
2 Register to vote
If you are not on the electoral roll, you may find it more difficult to get credit. Lenders verify identities by checking the electoral role. To register, go to www.aboutmyvote.co.uk to download a form.
3 Cancel unused creditcards or accounts
Unused credit limits will increase the amount of credit you have available and could reduce your credit score and scare lenders off. Also ensure that all of your active accounts are registered to your current address to ensure that identity checks run smoothly.
4 Keep up payments
It sounds simple, but you must make sure you are never late with payments on all credit agreements you have. Late or missed payments or CCJs will leave black marks and damage your credit rating.
5 Get into the savings habit
Set up a regular savings account to get you into the habit of paying out each month and to improve your standing and give you a buffer against unexpected events.
6 Build relationships
Lenders are often happier to lend to customers who have an existing relationship with them. If you have a current account with a bank or building society, you may find that it is easier to get a mortgage with the same lender. It may have special offers and discounted rates for existing customers. If this is not the case, consider moving your current account and savings to your preferred lender.
BEST MORTGAGES FOR NEWCOMERS
10% DEPOSIT Variable: HSBC discounted variable rate at 3.84% (SVR minus 0.1% for two years) – no product fee and no valuation fee.
Three-year fix: Post Office 4.75%, plus £995 fee.
Five-year fix: HSBC 4.89%, with no product fee and no valuation fee.
5% DEPOSIT Five-year fix: Skipton Building Society 5.99%, with £195 fee.