What are the finance options available to first time buyers?
The Government’s latest initiative, called HomeBuy Direct, is aimed at helping 18,000 first time buyers to purchase a home at sites across England (for a list see http://www.homesandcommunities.co.uk/). Buyers will be aided by an equity loan, part funded by the Government and the housebuilder, that can cover up to 30% of the purchase price. The loan is free of charge for five years; a monthly charge applies from year six.
On the open market many banks – Lloyds TSB, Britannia BS, C&G – are lending up to 90% of a property’s value to first time buyers, meaning you have to supply the 10% deposit. Some are applying provisos, such as Halifax who will only lend up to 85% LTV to everyone; those looking for 90% loan to value (LTV) will need to open or already hold a salary funded Halifax/Bank of Scotland current account.
The types of mortgage available remain broadly unchanged. You can take out a repayment (capital and interest) or an interest only (ISA, pension, or endowment mortgage). When it comes to interest rates on mortgages, there’s a whole raft of options: You can fix, cap, discount, track the Bank of England base rate, and take a standard variable rate (SVR).
There are a couple of other things to bear in mind too. Usually, there will be a booking fee and an arrangement fee, which can amount to as much as £2,000, dependent on the mortgage you choose. Often, however, they are waived as incentives. The booking fee, if applicable, can normally be added to the mortgage. There will also be legal fees, and lenders will require you have a buildings insurance policy.
So, what about the interest rates and how much is your mortgage going to cost you? As previously stated, the current volatility makes a statement almost meaningless but for a first time buyer mortgage in mid-January 2009, Yorkshire Bank was offering a two-year fixed rate of 5.99%. Britannia BS has a 4.99% standard variable rate option for the term of the mortgage with no arrangement fees.
Lastly, as all the small prints read, your home is at risk if you do not keep up your mortgage payments. The Council of mortgage Lenders, which represents lenders, has predicted that 75,000 homes would be repossessed in 2009, up from an estimated 45,000 last year. The 2008 figure was itself a massive increase on the 26,200 repossessions the occurred in 2007.
Mortgage information from 4Homes
Affordable Housing Schemes For First Time Buyers
Affordable Housing: What's On Offer To Buy?
Mortgages For First Time Buyers
First Time Buyers: The House Buying Process
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