According to Halifax, over 362,000 people got on the property ladder in 2022.
First-time buyers accounted for over half of all home loans in 2022, but with so much speculation around the state of the property market, anyone buying property for the first time will probably be feeling uncertain. As interest rates reach their highest level in 14 years and mortgage costs increase, can a first timer still get a foot on the ladder?
First-time buyers are now 32 years old, on average. Getting your own home for the first time will likely mean paying over £300,000 for a property and putting down, on average, a £62,000 deposit (according to Halifax). Of course, the people set to benefit most from any fall in property prices are first time buyers. The average house price fell 0.6% in January to £258,297 - the fifth month in a row that prices have fallen - but still, first-time buyers must grapple with high mortgage payments and the cost of living crisis.
One solution is to take out a joint mortgage. According to Aaron Strutt of Trinity Financial, more first-time buyers are taking joint mortgages in order to borrow enough money to get on the property ladder, and almost two-thirds of mortgage completions are now in joint names with two or more people. He says: “Income multiples greatly affect the amount you can borrow for a mortgage. Banks and building societies technically use mortgage affordability calculators to work out maximum loan sizes, but ultimately many will lend between four and 5.5 times single or joint incomes. Some lenders will even provide six times salary mortgages to those willing to pay higher rates or lock into a longer-term fix.”
Another solution is to look at guarantor mortgages, which have changed in recent years. Strutt says: “In the old days, the guarantor used to go on the mortgage application and the title deeds. Now parents go on the mortgage application but not the property's title deeds. This means they are unlikely to be liable to pay the additional stamp duty, which property owners are now responsible for when they purchase an additional home, even if they are not going to live in it”.
With the increase in house prices over the last 50 years and the shortfall in available rental properties, one way of making your mortgage repayments more affordable is to rent out a room. You can earn up to £7500 a year tax free using the rent a room allowance and this can help offset the cost of mortgaging.
If you are planning to get on the property ladder and want to know how much you can borrow, you will need to shop around or approach a good broker to get the most generous loan size, especially if you have credit cards, loans or cars on finance. Click here to use Trinity Financial's mortgage calculator.