There is a large deficit of homebuyers who are middle income and 25 to 35 years old. It is widely reported that over half of first-time buyers will have to look to their family members for help with buying their first house. Although the interest rates are historically low, house prices are extremely high compared to income. We have yet to see how Covid 19 will affect the cost of property. However, if there is a fall in house prices, first time buyers are still likely to need some help.
The main block to a first-time buyer is:
- Level of income
- A deposit
- The price of the property
We cannot do anything about the price of the property. However, we can do something about advising on the income and the deposit.
- A first-time buyer can buy with someone else (a friend or sibling). Their joint income and deposit will mean they can afford a bigger mortgage
- A joint mortgage, sole proprietor mortgage is where the parent/grandparent, can share the mortgage but not go on the title deeds of the property. This means your child/grandchild should be able to borrow a bigger mortgage, depending on the parent/grandparent’s commitments. Once the first-time buyer’s salary increases sufficiently, the parent/grandparent can be removed from the mortgage
- Housing Associations offer shared ownership properties where the buyer has a mortgage for their share of the property, and they pay rent to the Housing Association for the Housing Association’s share
- The Government recognises the problem and have helped with the deposit by introducing Help to Buy. Help to Buy gives the buyer an interest free loan of 20% (40% in London) for 5 years on eligible new houses or flats
- A parent or grandparent can ‘gift’ a deposit. You can start an investment as soon as possible and we can advise on a suitable investment vehicle
The value of an investment with St. James's Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.