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01 Sep 2022

The Cost of Living

The cost of living, the cost of living, the cost of living.

We are not going to escape these words as they form the beginning, middle, and end of news bulletins, as well as the clear go-to and leveler conversation at parties.

My message is slightly different - don’t panic.

The worst time to make a decision is when you do not have all the information (also late at night, never make an important decision at the end of the day!).

I can only describe the current situation as an information black hole, which is down to the fact we are lacking a leader/decision-maker at the helm.

Reports stating the COL crisis could be worse than the pandemic, may be right. In which case, the incoming Prime Minster’s clear priority is to provide support in the same way support was provided during Covid. Many people and businesses wouldn’t have survived had it not been for Furlough, Bounce Back loans, Covid grants, Mortgage Payment Holidays etc.

Liz, I mean, our new incoming Prime Minister, has actually had more time to decide on policies and support packages than any minister had during the pandemic when an enormous amount of logistical decisions were needing to be made and implemented in a very short space of time.

My message, the energy crisis is affecting all of us, so, therefore, a solution WILL be found.

First Time Buyers

In EVERY market, we need first-time buyers entering in order to both purchase the new build properties being built, AND the typical first-time buyer homes that enable second-timers to move on up the ladder.

The demand from first-time buyers hasn’t waned proving the desire for people to own their home will continue, despite the ‘COL’. The cost of renting has surpassed record levels, increasing up to 20% in certain areas of the country over the past 12 months. These increases further fuel the want/need to look at home ownership as an alternative to letting.

So, things to know:

Help to Buy is the Government initiative that helps first-time buyers purchase New Build properties by providing a 20% equity loan (40% in London) with no repayments for the first five years. If interested in this scheme, be quick as it closes to new applications on 31st October 2022. If you successfully apply in time, you will have to be in a position to complete by 31st March 2023 at 6pm. Further information

5% Deposit mortgages are still available with these mortgages available from leading high street banks and building societies. A significant number of people avoid speaking to a broker about their options due to pre-conceptions about what is possible. Affordability has to be sufficient but providing it is met, lenders are happy to lend with a 5% deposit from either the applicants or from a family gift. The larger your deposit, the better interest rate you will be offered, although if you only have a 5% deposit, please know that you can still purchase a home.

Gifted deposits are a factor in the majority of first-time purchases. Gifts coming from parents, grandparents, and other family members has also elevated the purchasing power of first-time buyers. Many gifts are cash gifts but, increasingly, elder family members are borrowing using Equity Release in order to pass early inheritances, something that is known as a lifetime gift.
Equity release is the fastest growing sector of the mortgage market as the total value in UK Homes increased by £800bn in 2021, as reported by Savills.

First Homes is a Government scheme launched in England only. The scheme offers first-time buyers a discount on specific properties allocated as a ‘First Homes Home’ of between 30% - 50% of the market value. No repayments are due on the part you do not own as it is permanently owned by the local council. These homes will remain in the community to allow first-time buyers to access their own homes and priority will be given to key and essential workers that live in the area the property is located.

At present, not many properties have been allocated to First Homes but the plan is for 10,000 homes a year to be available.

Shared Ownership will always be an option we discuss with clients as it was the way my wife and I were able to purchase our first home back in 2003. We used Notting Hill Home Ownership and purchased 40% of the property, a two bedroom Victorian home in East London and loved it! The scheme is exactly the same as it was then, in that you will own a percentage of the property, say 50%, and pay rent to the housing association for their share. Stamp duty is only calculated on the share you purchase. A deposit is still required being between 5% and 15% of the share you purchase. Further information

I started this blog with my views about how the lack of information can create fear and uncertainty.
The same is relevant to housing in that as we approach the end of Help to Buy, our new leader will also be required to make decisions on how we guarantee first-time buyers can continue to access the market.

These first-time buyer schemes are pivotal to supporting the market and as such, we await with bated breath any announcements, and of course, provide you with the information as we receive it.

The Cost of Living

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