As the situation for first-time buyers seems to get more difficult, the profile of an average new homeowner has evolved.
According to government statistics, the average age of today’s first-time buyer is 32, and there are more couples buying houses together (74%), than single ownerships. In addition, 37% of first-time buyers are already parents by the time they move into their own home.
Does age matter?
It depends how you look at it. On one hand, we all take life at different paces and buying your first house over the age of 30 is not that unusual anymore. On the other, there are more options available to younger adults who are saving toward their deposit.
Unfortunately, time travel hasn’t been perfected just yet and you might not even take that option if it were available, so the real issue here is: how can you make the most of the options available to you, if you are buying your first home over the age of 30, 40 or even in later life?
Saving for a deposit
The hardest part of affording a house is the process of saving money toward your deposit. Across the UK, rising house prices is making this more difficult.
During 2017, Greater London had the highest average first-time buyer deposit, at £112,604. That’s hardly surprising, but it is more than three times higher than the figure for the UK, £33,339. The area with the lowest first-time buyer deposit, Northern Ireland, saw an average of £17,636 (Source: Halifax).
This is where your attention will be needed first and one of two key areas where your age may be a factor in the methods you can choose from (the other concerns accessing the property market, but we’ll come back to that).
- Lifetime ISA (Individual Savings Account)
Lifetime ISAs are available to anyone aged between 18 and 39. The account must be opened before your 40th birthday, but you may continue to make contributions until you turn 50. The main benefits of the Lifetime ISA are the tax-efficiency and the government bonus. At the end of each tax year you receive a bonus equal to 25% of your contributions for that period. That means that, if you make the maximum deposit of £4,000, you will receive a £1,000 bonus; that’s free money.
You can withdraw money from a Lifetime ISA to use as a deposit on your first home, or as retirement income after your 60th birthday, without incurring penalties. However, taking cash out of the Lifetime ISA for any other reason could see you facing a large penalty. This is equal to 25% of the amount you withdraw. That might sound like you will simply lose your bonus, but it means that you lose the value of both your bonus and 6.5% of your original contribution.
- The bank of mum and dad
According to research by Legal & General, more than a quarter of first-time buyers (27%) will receive help from friends and family during 2018.
While some may be less inclined to ask for help as they get older, parental help may be more accessible now, than during their younger years. Mum and dad might have been able to put more into savings since you and your siblings flew the nest, or they may have started thinking about the legacy they will leave behind, in which case, it might be time to talk to them about living inheritances.
Accessing the housing market
There are several government schemes in place which are designed to help first-time buyers to get their foot on the property ladder. But are they suitable for more mature buyers and will your age stand in the way of you using them?
- Help to Buy Equity Loan
While not subject to age restrictions, this scheme may mean that you are repaying money into retirement, or for longer than you would like to be. This is due to the way the loan works:
Under this scheme, the cost of your first home is broken down into three parts:
- A 20% loan (40% in Greater London) which forms the bulk of your deposit. This is provided by the government and is repayable by you, with no interest due for the first five years.
- The remaining 5% deposit; This is the amount you put toward the house yourself.
- A 75% mortgage. A traditional mortgage from a commercial lender.
This scheme is only available for new build properties.
While breaking the cost down this way can make accessing the property market much more manageable, it is worth making sure that you will be able to manage both the loan and mortgage repayments comfortably, before committing.
- Shared ownership
This scheme enables first-time buyers, or those who have owned property previously, but don’t anymore, to buy between 25 and 75% of their home, while continuing to pay rent on the rest. This is usually offered by housing associations and means that you can gradually increase your share of the property, until you own 100%.
This could take a lot longer than a traditional purchase and will mean that you will continue to be governed by the housing association in some ways. However, it could be a simple way to ease into home ownership, with less pressure to save a large deposit.
How can financial advice help?
We can offer solutions and suggest ways to make buying your first home more accessible. As independent financial advisers, we can give you an overview of all options facing you to help you to see the bigger picture.
To discuss your options and make buying your first home easier, regardless of age, get in touch with Sarah or Bev on 0115 933 8433.
