Reading percentages and figures on house prices can be overwhelming and disempowering. Rosie, a Mortgage Expert Team Lead here at Habito, explains why property indexes shouldn’t scare you and how there are various ways to get yourself on that ladder.
Hi, I’m Rosie, a Mortgage Expert Team Lead at Habito.
With house-price growth consistently outstripping wage growth, it can often seem impossible for a young person to buy their own home.
Having a good-size deposit is important because it impacts what interest rates are available to you as a borrower. The larger the deposit, typically, the lower your monthly repayments will be.
Deposits can be as low as 5% or as high as 25% of the value of the home. However, saving for the minimum deposit of 5% is still out of reach for many, especially while also covering the cost of private rent.
ONS figures show that the UK’s average house price is now £271,000 and we know that buyers need at least a 5% deposit. Using the average house price as an example, that’s a minimum deposit of £13,550.
Beware of property indexes
But, a word of caution on the property indexes. It’s really important to remember that there’s really no such thing as ‘averages’ when it comes to house prices.
Price growth varies wildly from region to region. According to the latest ONS data, price growth in the North West climbed a huge 10.8% in the year, but started lower than the national average at £197,797. Meanwhile, London continues to be the region with the lowest annual growth at 5.1% but the homes there are the most expensive in the country at £519,934.
Try to not be put off by the monthly release of national house price statistics. Look at the type of first home you want to buy, in the area that you want to live in - that’s what’s relevant to you, not national figures.
You can use free online mortgage calculators to see at a glance how much you could potentially borrow on your salary, and with your current savings what price of house you could buy. Depending on where you want to live, and how much you have saved, there’s a chance you could be in a better situation than the national statistics might lead you to think.
How to get the money together
Unfortunately, it’s hard to “hack” your way to saving for a deposit. However, there are lots of schemes designed to help you get on the property ladder, from the Help to Buy loan to Shared Ownership, and saving schemes like LISA (Lifetime ISA) where the government gives you a 25% bonus when you put your savings towards buying your first home. The early you start saving in the LISA, the more you can save, and the more your bonus could be.
There’s also innovation in the mortgage market. Last year, we launched Habito One 7x - allowing borrowers with specific sizes of income, or certain jobs - like teachers, nurses, police, vets, engineers - the ability to extend their affordability to 7x their salary if they take a long-term fixed mortgage. There are several lenders in the market which allow for greater borrowing with mortgages designed for certain professions, so it’s worth checking if your career is included in those lists, as getting a loan from one of these lenders could make a big difference to what kind of home you could buy.
Getting the best mortgage rate will come down to an individual’s circumstances. However, with 20,000 mortgage products in the market, there’s never been a more important time to seek whole of market mortgage advice. There are plenty of brokers out there, including Habito, that offer qualified advice for free and making sure you are on the right mortgage for you can save you thousands of the course of the loan in unnecessary overpayments. Get started today.