Helping First Time Buyers
First-time Buyers have accounted for twenty-five per cent of our mortgage business this year at the Newcastle Building Society and there is a lot for First-time Buyers to be optimistic about.
There is a range of Government schemes that make it possible to get on the housing ladder with only a small deposit. One such scheme is Help to Buy for those who can only muster a 5% deposit to buy a home. Equally under the Equity Loan scheme, buyers with a deposit of at least 5% of the property value, can access a Government interest-free loan of up to a further 20%. This is extended to 40% in London. Furthermore the Mortgage Guarantee allows for a 5% deposit but, instead of a loan, the Government provides a guarantee to the lender against the borrower failing to keep up with repayments. Together, with the Help to Buy ISA launched on 1 December last year and the Lifetime ISA announced in 2016, it's tempting to think first-time buyers have never had it so good in terms of the support on offer.
This available help is often used in very different ways. Shared ownership is now as appropriate for professionals in London to get on the housing ladder as it is for less well-off youngsters in other parts of the country.
But with choice often comes complexity and unforeseen consequences. The extension of loan terms to 40+ years is a classic case in point. Affordability is undoubtedly improved but the interest paid over the life of the loan is increased dramatically, and an ongoing mortgage commitment could feasibly become a millstone in the twilight years of a person's life.
Even if you can get First-time Buyers to consider issues that far into the future, the likelihood is that the pressing need of here and now will understandably trump longer term concerns. Of as much interest is saving money in the present on things like valuations, mortgage arrangement fees, solicitors, Land Registry, Local Authority searches, Stamp duty (for properties over £125,000), building, contents, life and protection insurance, decorating and furnishing and moving costs, to name a few.
Our experience of the first-time buyer from a product perspective is that the most successful products have been no or low fee, with free valuations, and in more recent times, free legal costs. Speaking to First-time Buyers at seminars that we have held, the overall message is that they were shocked by the legal and other costs associated with buying a home - a key reason why we developed our All In One Mortgage product.
If you have any other queries you'd like to discuss with us, please don't hesitate to get in touch with our Intermediary Support Team by calling 0345 602 2338 or via webchat (Monday to Friday, 8am to 6pm).
Find out more about Newcastle Intermediaries' Help to Buy offering here.
This information is for use by authorised mortgage intermediaries only and should not be relied on by customers.