🏠 Mortgages Don't Need To Be A Pipe Dream 👀

As a nation, we Brits are obsessed with house prices. Those on the property ladder want an inexorable rise in the value of their homes, inflating their capital wealth and ability to move up the rungs to a bigger, better home. Those who haven’t yet managed to get a leg up are just as desperate to see prices come down to more affordable levels.

The same can also be said for those who are renting, and in London and the South East, that tends to be the majority of young professionals nowadays. While landlords and property owners like rising values, renters are faced with the double whammy of forking out on higher rents and having even less money over to save towards a deposit, the minimum size of which is constantly rising.

The fact is that we are in the midst of a housing crisis in the UK. ‘Build more homes’ is the mantra bandied about by all corners as the silver bullet answer, and yet there are too many vested interests that act as barriers to delivering the number of homes needed to really make homes more affordable.

Building firms have shareholders to satisfy and therefore little incentive to flood local markets with new homes, bringing prices (and profits) crashing down.

Government doesn’t really want to legislate to bring prices down or provide the funding for millions of new social homes – the people who vote Conservative are on the housing ladder thanks very much, why would making them poorer be in this government’s interests?

Falling prices aren’t actually in most people’s interests either, as where people have borrowed large mortgages to fund the purchase of their home, even a 5 per cent drop in values can push them into negative equity – where they owe their lender more than the value of their property.

This in turn can lead to mortgage lenders raising rates for those with smaller deposits and equity or demanding much bigger deposits and refusing to lend to those with less equity to put in themselves. Hey presto – it’s EVEN harder for those not on the ladder to get there.

All of that leads to fewer homes exchanging hands, fewer people moving and even less incentive for builders to build – who will lend prospective buyers the mortgage to purchase? They reason.

This doesn’t paint the prettiest picture unfortunately, particularly for those who do want the responsibility of a mortgage and their own home but are struggling to save and/or qualify for a large enough loan to fund the purchase of a property that is fit for purpose.

What is the answer then? There is no catch all way to solve this but there are lots of little things you can do to help yourselves as much as possible given the less than ideal circumstances.

1. Sign up to automatic savings services

The rise of digital banking has prompted the launch of loads of clever online services that can support your saving with very little effort from you. Services like Moneybox round up the pennies every time you spend on a linked card and sweep them into your Moneybox account. This could be a straightforward investment account, or they also offer a cash Lifetime Isa which has other bonuses to boost your saving towards a home.

2. Open a Lifetime Isa to maximise your savings

If you do nothing else, this one is a must. The government will give you £1,000 a year if you save £4,000 into your Lisa. You need to be between 18 and 40 to open one, and you have to use the savings towards buying your first home worth up to £450,000 or wait to withdraw savings until you’re 60 or there is a 25 per cent penalty. Money you save into this shouldn’t form part of your emergency rainy day savings in case you need to access them before this.

3. Investigate Help to Buy before it’s too late

The Help to Buy scheme offers you an equity loan funded by the government. This acts as a ‘top up’ to your deposit and can be used to buy a newly-built home. The purchase price must be no more than £600,000 and there’s rather a lot of small print governing how much you can borrow. As it stands, the government has said it’s going to scrap the scheme by 2023. Find out more here.

4. Shared ownership could work for you

It’s not one of my favourite schemes because those who do it can find themselves in a bit of a tangle when it comes to remortgaging their share, or trying to ‘staircase’ up – in other words, buy a bit more of the property from their housing association. There’s also a mortgage and rent to pay. BUT, if you have a small deposit and you’re buying on your own and therefore cannot borrow a big enough mortgage solo, it’s an option that lets you invest your money into part of your own home.

5. Make an appointment with a mortgage adviser today

You don’t need to be ready to buy now to talk to a mortgage adviser now. In fact, good advisers will be able to help you plan your money, and how you save and spend so that you can build up a deposit faster and to give you some practical goals on what you should be looking to save and what sort of mortgage you should be aiming for. There are lots of reputable firms who’ll do this initial consultation for free.