House prices have reached an unaffordable high, especially for those who are just starting out and want to invest in a property.
According to the Halifax house price index (Feb 06) the average home costs almost £175,000 and to get a mortgage on this would require an annual income of around £50,000, more than double the salary of the average first-time buyer.
Housing Minister, Yvette Cooper, said, “Single people often take out mortgages many times their salaries in order to afford their own places, but with rising interest rates and uncertainty about the housing market, this is an increasingly precarious option.”
However, the Government and mortgage lenders have been thinking creatively in recent years, in efforts to make that first step easier.
The result is a boom in alternative mortgage arrangements for newcomers, including shared ownership schemes, key worker living and share to buy deals for groups of friends.
New Build Homebuy
New Build Homebuy, which shared ownership will be marketed as from April, is one option that will give people the opportunity to buy as much of a property as they can afford, and rent the rest.
The size of the share will depend on income and savings, but they can range from 25 per cent to 75 per cent, then you can buy additional shares when it suits and eventually you would own the entire property.
The average income of those involved in this scheme last year was £26,000 and many of the new developments will be bought by single people earning less than £20,000 a year.
As the homeowner, you would be responsible for the initial costs, which include legal fees, surveys and the stamp duty, and the monthly rent.
This is a proportion of the total rent for the property and is calculated by the housing association based on the size of the share you donÂ’t own.
Ms Cooper said, “The HomeBuy scheme will increase home ownership for those who are currently priced out of the market.”
So, if you are interested in buying a property and canÂ’t afford an outright purchase, then this is the ideal option.
But, living in expensive parts of the country, like London and the South, means that more people are moving out of the cities in order to get onto the property ladder.
For firefighters, police officers, nurses and teachers, moving further away from their place of work is virtually impossible.
Berwyn Kinsey, Head of the London Housing Federation (LHF), said, “There is no denying that London has a huge problem. Everyday we hear about nurses, teachers and police who are leaving the capital – but it is not just public sector workers who are struggling – we are now seeing everyday ordinary working Londoners moving out to live in more affordable parts of the country.”
Key Worker Living
Key Worker Living was set up to help those employed by public sectors to remain in their jobs and to aid future recruitment in areas with high living costs.
According to LHF, people working in London would need to earn £41,000 a year, and pay £935 in mortgage payments, to afford an average two-bedroom property. With this scheme however, the same type of house would cost only £416 a month, which is less than half the cost.
The most common option with key worker living is the equity loan scheme, which enables you to buy any property on the open market.
The amount of the loan will extend to £50,000, or up to £100,000 for some teachers, and you can add this to your mortgage for an initial cash boost.
The benefit of this option is that the loan is only repayable on the sale of the property, or within two years if you leave your job as a key worker.
To be eligible, your maximum household income can be no more than £60,000, and the only restriction is that the property is within reasonable traveling distance of your workplace.
If you still think you canÂ’t afford to buy that first home, there are other ways, such as buy-to-let or joint ownership that are becoming increasingly common and allow you to club together with friends or rent out a spare room to help cover the mortgage payments.
