Mortgages: Expert advises public amidst rising base rates
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Despite a predicted interest rate hike to come from the Bank of England, mortgage rates are still at all-time lows, and first-time buyers should not be discouraged by the rising rates. Even though Rishi Sunak’s Stamp Duty holiday is over now, the UK housing market remains buoyant with high demand and interest rates low. However, the biggest challenge for first time buyers is saving for such a large deposit.
The deposit that a first-time buyer needs to put down in the UK now averages nearly £59,000, new reports suggest so it’s important people take advantage of schemes to provide assistance.
In an exclusive interview with Express.co.uk, Sarah Thompson, Managing Director of financial Services at Mortgage Scout offered guidance for first time buyers on how to get their foot on the ladder.
She said: “Saving for a deposit can be a long and challenging process, and for many with high rent and living costs, it can seem almost impossible for first-time buyers to get a foot onto the property ladder.
“With many young people struggling to find the money to put down a significant deposit, it comes as no surprise that the bank of mum and dad is now the country’s ninth biggest home buying lender.
“Despite mortgage rates rising, now is the time for buyers to get themselves financially ready and in a position to move quickly.”
Ms Thompson mentioned that these buyers should look at saving their money in a Lifetime ISA as a way to get tax free cash and a government bonus.
People can open a Lifetime ISA and get a 25 percent government bonus tax free.
The maximum amount people can put in is 20,000 per tax year.
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She said: “First-time buyers should firstly consider investing in ISAs, as they provide vital support for those who might otherwise struggle to secure the finance required to buy a property.
“It works by allowing buyers to either top up their deposit with a government-funded loan or take out a mortgage with a government guarantee attached.”
Moreover, an important step she mentioned to getting onto the property ladder is being prepared.
She explained a lot of buyers may not even know how much money they will specifically need to a mortgage, which is ineffective when trying to save for one as there is no goal.
She continued: “Buyers should get their bank statements in order to show that the mortgage would be affordable, for example using a mortgage calculator.
“Also, as for the coming predicted inflation rise, due in a few weeks’ time, this shouldn’t affect buyers if they are on a fixed rate.
“However, if they are on a variable rate, it would be worth their while speaking to some mortgage brokers to see if they can get a better deal.”
Unfortunately for first time buyers, UK house prices have hit a record high, with the price of the average home now topping £270,000 for the first time, according to Halifax’s latest house price index.
In total the value of the average property grew by 0.9 percent in October, adding £2,500 onto the value of this home.
The first-time buyer annual house price inflation (9.2 percent) is now at a five-month high and has pushed ahead of the equivalent measure for home movers (8.1 percent).
Commenting on these figures estate agent and former RICS residential chairman Jeremy Leaf said: “These figures are no real surprise as they confirm what we have been seeing on the ground – there is still plenty of life left in the market.
“However, buyers can still benefit from record low mortgage rates and many, particularly those entering the market for the first time, must have breathed a sigh of relief yesterday when interest rates remained unchanged.
“Looking forward, we expect not much change with more demand for houses than flats, masking larger differences in percentage changes.”
Additionally, SPF Private Clients chief executive Mark Harris said: “The return of first-time buyers to the market, helped by high loan-to-value mortgages and the help of the Bank of Mum and Dad is welcome, as they are the lifeblood of the market.
“However, with first-time buyer annual price inflation higher than that of movers, one wonders how long they can keep up with rising prices.”
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