Alistair Darling: No Friend of First-Time Buyers
(has a wealth of information on all things financial including
budgets, saving and improving your credit rating)
(This government website gives details
of the HomeBuy schemes available)
(for details of shared-equity with Places for People)
(for details of offers available with Barratt Homes)
(for details of offers available with Bryant Homes)
The Times (Bricks & Mortar)
Images courtesy of rics.org.
By failing to align the stamp duty threshold with soaring house price inflation, Mr Darling has done nothing to help the vast majority of first-time buyers who do not qualify for key-worker schemes. Chris Coates, managing director of Galliford Try Homes summed it up by saying: “The Chancellor is out of touch with the financial pressure facing this group and seems unable to grasp their importance in the housing market.”
This failure to act comes on the back of the withdrawal of many first-time buyer mortgages, such as the 100% loan, meaning that in most cases first-time buyers must now have a 10% deposit saved to qualify for a competitive deal. In the current market this equates to an average of almost £20,000. That’s a tall order for all those twenty and thirtysomethings out there without the fallback of “Bank of Mum and Dad”.
Stamp duty is payable on the full purchase price of properties starting at just £125,000. The reality of this fact means that just 16% of all properties are not subject to this tax and that 61% of first-time buyers are paying stamp duty. Halifax figures show that nearly all first-time buyers in the South now pay stamp duty, with the average bill for a London property coming in at £8,675.
One option available to those trying to get on the first rung is taking advantage of incentives being offered to tempt buyers into new developments. This normally comes in the form of the builder contributing towards the deposit, stamp duty and legal costs. If you have some savings, this might be the extra bit of help that makes all the difference. Examples of builders employing such schemes are Barratt, Bryant and Trovit Homes.
Even with such schemes in existence, when it comes to first-time buyers, there is no substitute for plain old saving. It is also advisable to try to clear credit cards and overdrafts because levels of debt will be taken into account, in addition to your salary, by a potential lender. A check of your credit rating with Experian or Equifax is also advisable just in case there are irregularities which are stopping you from securing a mortgage.
HomeBuy is the government scheme to help key workers and social tenants buy a home. It is divided into New Build HomeBuy and Social HomeBuy. The budget has been kinder to people who qualify for these schemes; from April 1st, buyers on them will largely be exempt from stamp duty.
The scheme involves shared ownership of government-approved new-build projects or council houses (in the case of Social HomeBuy) and typically sees the buyer purchase a share of between 25 and 75% of the property’s value whilst paying rent on the remainder. They then have the option of increasing their share in the property in the future; a process known as “staircasing”. From April 1st this year, first-time buyers on the HomeBuy scheme will not pay stamp duty until they own 80% of their home. Even then this will be at a much reduced rate because they will only pay the tax on 20% of the house’s value.
There was also good news for shared-equity buyers that come under the Open Market HomeBuy scheme. Currently, if you qualify for this scheme, you can chose a house from the open market, borrow up to 32.5% of the property’s value from special “low-cost” sources and take out a regular mortgage for the rest. From April 1st, buyers will be able to source up to 50% of the price from these sources, depending on which shared-equity scheme they qualify for. If you think you might qualify for such shared-equity, look out for “Ownhome” and “MyChoice HomeBuy”; you will need to be a key-worker or a first-time buyer with an annual household income of less than £60,000.