A major Boost for first time buyers.
First Time Buyers account for around 36% of all new loans in the financial market, so ensuring they are happy consumers has to be a primary goal for all high street lenders. However in a market where house prices are continuing to rise and the number of first time buyers is falling, this is becoming an increasingly difficult goal to accomplish. The average age of first time buyers has been forced up to thirty-three years old, as realistically around 33% of under forty's cannot afford to make that step onto the housing ladder.
This isn't however reason to despair, instead, the state of the housing market has forced both the government and lenders to implement new affordability measures. A number of lenders including some of our high street lenders have changed the method in which they calculate how much we can borrow. Instead of the usual way of using an income multiple to arrive at the maximum level of borrowing lenders are starting to use affordability, which takes into account life style and credit scoring. If you have managed your existing credit in a satisfactory manner you are far more likely to fall into the box that allows the lender to stretch beyond what they would normally lend. Credit scoring is the key factor to enhanced lending terms. Most lenders that use credit scoring have a low, medium, and high score banding which will indicate at what level you can borrow. The importance of looking after your credit file and the many factors that will impact upon your score have never been high lighted so much now that there has been major shift in the way that lenders view our ability to repay loans.
With buyers often forced to finance their first house purchase whilst still bearing the burden of fresh student debt these schemes become ever more in demand. The other major change has been a number of lenders that will now lend in excess of the purchase price or valuation. Subject to credit score and status some lenders will now lend up to 125% of the purchase price or valuation which will allow clients to pay off any short term loans or credit cards to improve their cash flow. Additional borrowing to cover fees or home improvements is also acceptable. These schemes will certainly allow some clients who may have been able to purchase previously to get their foot on the housing ladder.
This may sound the perfect solution for cash-strapped buyers, and it can be. However one must always be wary, the terms may seem attractive at first glance, but these excess loans can often be more expensive in the long run. When spending any excess ensure you manage it carefully, especially when using it to pay off store or credit cards. If you are using it on home improvements then look to spend it on home improvements that are going to improve the value of your property. When the valuation of the property allows you to remortgage, normally 85- 90% loan to value it would be to a lender who may offer more attractive terms because of the lower risk to the lender with the reduced loan to value which would lower the cost of borrowing.
In order to counteract the fact that in 85% of towns and villages first time buyers cannot afford the average priced property, Royal Bank of Scotland have produced their own property price index, informing you of the most affordable areas in which to purchase.
Furthermore in response to the growing concern for the numbers of first time buyers, lenders are now offering borrowers the opportunity to club together. Some lenders will allow up to four friends to combine finances, sharing a mortgage in order to afford the property of their choice.
It is not just lenders; the government is keener than ever to encourage first time buyers into the market place. Housing associations are now offering borrowers the option of shared ownership. In Bedfordshire, the Bedfordshire Pilgrims attempt to offer people the chance to buy homes where they want and need them. Shared ownership allows you to purchase, usually, anything from around 25% of the property and more at later dates. Eligibility for these schemes is decided by independent housing associations and it can the be a perfect way to finance an otherwise impossible purchase.
Every scheme has its drawbacks, which is why it is so essential to know which is the right one for you. . Although 75%'s of first time buyers said they would consider clubbing together to buy with friends, it is important to consider it can create a very unstable household. And with lenders now offering wider scope to borrow than ever, 125% loan to value in some cases, it can be easy to take on more repayments than you can afford. With so many options available it is more important than anything else to be well informed and make the right choice. For a first time buyer the entire process is likely to be foreign ground, never will it be more beneficial to seek the advice of an experienced Independent Financial Advisor, after all the choices you make now can shape your finances far into the future. An Independent Financial Advisor will help you to find the best mortgage and ensure that first step onto the property ladder is one that will set you in good stead for your future in a rapidly growing and vastly competitive market.
Author: Emma Blackmore
