First-time buyers should find a silver lining to the cloud that has settled over the property market. Prices are dipping — and so are mortgage rates — making homes more affordable than for several years. Housebuilders are once again offering more attractive incentives, including “no-deposit” deals, a big plus for many first-time buyers, as often the lack of a deposit is the main obstacle to buying.
Estate agents report that the number of first-time buyers registering with them has increased following the base rate cut earlier this month — even so, there is some way to go before homes become truly affordable.
Tighter lending criteria could stop first-timers taking advantage of the softer market, according to the Chartered Institute of Surveyors. One hundred per cent mortgages have been withdrawn and the average loan-to-value ratio offered to first-time buyers is 85 per cent. Based on the price of the average London property — now about £350,000 — a first-time buyer would have to find a hefty deposit of more than £50,000.
It’s the deposits that hold up the sales, “it’s a killer,” says Amy Jenkins, a 29-year-old Legal secretary, who moved back to live with her parents in Lewisham, south-east London, after a stint in rented accommodation. “I’ve got a thirtysomething salary and still can’t afford to buy.”
A no-deposit incentive from Barratt Homes, launched as the Dream Start deal, is enabling first-time buyers to get on the property ladder. Buyers pay 75 per cent of the purchase price and the remaining 25 per cent is deferred, interest-free, for up to 10 years or paid back when the property is sold. Barratt pays £1,000 towards legal and stamp duty fees and carpets and appliances are included. The deal is available at schemes in Anerley, Crawley, Harlow, Basingstoke and Basildon. Prices start at £141,000. Call 020 8688 0688.
At Kirby Cross, Essex, a village only one mile from delightful Frinton-on-Sea, four-bedroom houses can be bought for £172,500 (or, £230,000 without a Dream Start deal). Call 01255 679096.
Unsurprisingly, the “bank of Mum and Dad” is financing a record number of property purchases as first-time buyers priced out of the market turn to their parents for help. Last year, 14,000 parents released equity averaging £74,000 from the family home to enable their adult offspring to get on the housing ladder, according to the Department for Communities and Local Government. A study by mortgage lender Direct Line concludes there are 327,000 “handout homes” in the UK, a quarter of which have been bought by parents for student sons and daughters.
A foot on the ladder
Other options are available. Shared ownership (part-rent, part-buy schemes offered by housing associations and private developers) is now part of the mainstream housing market, and there is a slightly confusing array of Government-backed home-ownership schemes that aim to help 160,000 people on to the property ladder by 2010.
Cash-strapped first-time buyers who are not in key jobs could feel left out since most shared ownership homes are for people working in the public sector. “But more non-key workers on low and moderate incomes than before are being assisted,” says Graham Moran, director of Metropolitan Home Ownership, one of the official agents operating Government schemes in London. Call 020 8920 7777. So if you are, say, a charity worker or bank clerk you may be eligible.
As a rule of thumb, if your household income is more than £50,000 you are less likely to qualify. Under the Government’s New Build HomeBuy scheme, purchasers buy a minimum 25 per cent of the home and pay up to 2.75 per cent of the value of the remainder a year as rent.
Purchasers can increase their share to 100 per cent as and when they can afford it. See below to find out where these developments are.
Groups such as Notting Hill Home Ownership offer flats under this scheme along with leading housebuilders.
Aspiring buyers who are not key workers stand a better chance with the Government’s First Time Buyers’ Initiative (FTBI). Here you have to buy at least half the property but you pay nothing on the rest for three years. At that point, you start paying rent on the remaining share to English Partnerships, the regeneration agency. When the property is sold, 50 per cent (or the proportion not owned) of the open market value is repaid to English Partnerships. Existing FTBI sites tend to be on the outskirts of London and non-key workers must have some connection with the local area to be considered for a property.
Metropolitan Home Ownership and developer St George are selling FTBI flats at Beaufort Park, Hendon. Prices start at £87,475. Call 020 8511 8600.
At Becket House, a Barratt scheme in Brentwood, 20 flats are available with 50 per cent shares starting at £120,000. Call 01277 202649.
How to apply
Visit www.housingoptions.co.uk, and fill in a form for New Build HomeBuy and/or the First Time Buyers’ Initiative (you can apply for both schemes on the same form). If you are eligible you will be sent details of available developments. Or check your local authority website for any shared-ownership schemes in your area. For a list of HomeBuy agents, visit www.housingcorp.gov.uk, or call 0845 230 7000.