Why you might be having trouble buying a new home – and two ways to help
Recent data from the Office for National Statistics (ONS) has found the most suitable sellers in today’s market, who can take advantage of rising house prices and increased demand from existing homeowners looking to relocate. Richard Dana, real estate expert and founder of Tembo – a family lending platform that helps families buy homes with low interest rates – said first-time buyers face much more resistance. He revealed two reasons why they are struggling to buy a property and two that have helped some to break the pattern.
House prices vs wages
First-time buyers have been stung by a combination of rising house prices and stagnant wages, Dana said.
He said the “main problem” they face is that average house prices are now “eight times the average wage”.
Lenders are also failing to provide the money buyers need to close this gap.
Mr Dana said: “Banks and building societies typically lend about half of that amount, or about four times the average salary, which means there is a huge affordability gap based on what people earn against the price of properties. “
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The next hurdle in the way for buyers is the required deposit, which can be difficult to raise.
Mr. Dana said most would need to provide five percent at the “bare minimum” and “much more” would require 10 percent.
People using the Tembo service save around £ 27,000, an amount beyond the reach of many people.
The platform recently found that more than one in 10 first-time buyers couldn’t save during the pandemic, with many citing rent as the main reason.
The purchase assistance program
On the other side of the coin are the few 21st century first-time homebuyers who have successfully secured a first home.
For them, says Dana, the Help to Buy program has proven to be invaluable.
Help to Buy is a government-backed program that allows buyers to receive a 20% equity loan for a new home, allowing them to focus on a 5% deposit and a 75% mortgage.
People who want to use it should do so as soon as possible, as the program ends in April 2023 after eight years.
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Where have house prices increased the most?
People have moved during the pandemic, according to recent data, which shows house prices have risen outside London.
The Zoopla Home Price Index shows home prices increased 7.1% overall, with increases in several regions.
Liverpool, Manchester, Nottingham and Sheffield have all seen their rates rise by eight percent or more.
The regions recorded respective increases of 10.7 percent, 8.5 percent, 8.1 percent and eight percent.