There are two primary issues standing in the way of first-time buyers getting a foot on the property ladder. Those being – available inventory and financial viability.
Last year, somewhere in the region of 41,000 new homes were built as part of the on-going affordable housing scheme the government promised. The only problem being that less than 25% of these – around 11,000 – actually made it to the market and were made available for purchase. The rest were used for a variety of government-organised social housing and rental schemes across the country. Meaning that while affordable housing inventory did technically spike quite healthily last year, it didn’t do a great deal to help first-time buyers.
Whichever way you look at it, truly affordable housing for first-time buyers is still very hard to come by.
The Financial Issue
But even when a prospective first-time buyer does have access to affordable inventory, they face an increasingly difficult and expensive purchase process. Banks and conventional lenders across the board are continually refining and intensifying their qualification criteria for mortgage borrowers – largely locking a huge and important segment entirely out of contention.
For most, saving a deposit of 20% is simply out of the question. On a modestly-priced home of say £200,000, this would mean stacking up £40,000 in savings PLUS the rest of the fees, charges, taxes and so on required to fund a home purchase. Very few would-be first-time buyers have the kind of regular income that could realistically see £50,000 being saved up in a lifetime.
Even with a 10% deposit, it’s still a herculean task.
That said, there are various lenders on the market these days that are willing to offer 95% mortgages with only 5% required in the form of a deposit. Which can make it far easier for first-timers to save up – assuming they qualify for the loan in the first place.
In terms of qualification, it’s when applying for things like first time buyer mortgages that the influence of things like proof of income and credit ratings come into the equation. You may have a steady stream of income and have made only a couple of minor errors along the way, but these are exactly the kinds of things that can instantly count you out of the running.
Guarantor mortgage options are more than worth exploring – the loan and its repayments being guaranteed by someone in a more ‘solid’ financial position than you in the eyes of the banks.
Where bad credit is an issue, secured loans can offer a lifeline with absolutely no proof of income or positive credit score being required. If you have the required security to put up – of have someone else put it up on your behalf – this can be a great avenue to explore. The same also going for bridging finance, which can be useful for covering things like deposits and unexpected costs along the way, where repayment can be made over the course of a few months, rather than years.
So the short answer is yes – first-timer buyers can indeed find affordable housing, albeit somewhat thin on the ground. As for the financial issue, the key lies in exploring every available option with the help of an established and experienced broker, rather than assuming the traditional mortgage is the be-all end-all on the borrowing side of things.