HALF of Scotland’s would-be homeowners fear they will never make it onto the property ladder. But while it is clear that it is not easy to afford a first flat or house, the situation may not be as bleak as many people think.
According to Bank of Scotland, 48 per cent of potential first-time buyers believe they will not ever be able to buy, with only 29% describing themselves as confident about their prospects.
In fact, Lloyds Bank said there were 175,500 first-time purchasers across the UK between January and June. This was not only the highest number of first-time buys for over 10 years but, for the first time since 1995, the figure outstripped the number of home movers.
Andrew Mason, mortgage products director at Lloyds, said: “Despite continuing low mortgage rates, the home-mover market has stabilised with little movement in the first half of this year to leave first-time buyers now driving housing activity.”
Scotland remains one of the most affordable places in the UK, with average prices rising by 7% over the past 10 years against a rise of 18% for the whole of the UK.
The typical property price north of the Border is £209,496, compared to a UK average of £296,936. The only cheaper areas are Northern Ireland and the North of England.
Amassing the deposit for a first home is still a challenge for most would-be purchasers. But Ricky Diggins, network director for Bank of Scotland, said: “Even though it is arguably harder to buy now than ever before, there is help at hand.”
Four out of 10 prospective Scottish purchasers plan to spread the burden by buying with a partner, while one in five anticipate receiving financial support from family, and almost a third aim to earn the money they need by working extra hours.
Using a Help to Buy Isa could boost their savings. These tax-free individual savings accounts from banks and building societies pay a 25% bonus on savings destined for the purchase of a property worth up to £250,000.
There are no restrictions on withdrawals, but if money is taken out, it no longer counts towards the bonus.
Accounts can be opened with as little as £1, and once the holder has paid in £1,600, they can claim an additional £400. The maximum investment is £200 a month and savings of up to £12,000, including interest earned, are eligible for bonus payments.
This means that when a first-time buyer is ready to purchase, their solicitor can apply for up to £3,000 towards the cost.
A couple buying together could open two accounts and, if they deposited £400 a month for five years to reach the £24,000 maximum, claim £6,000.
Mr Diggins added: “Lots of people look to get help from their family, or partners, and are coupling that support with schemes like Help to Buy, to help them take that first step onto the property ladder.”
Help to Buy (Scotland) is a shared ownership scheme designed for first-time buyers and existing homeowners who are purchasing new properties valued up to £200,000.
Applicants must raise a combination of deposit and mortgage covering at least 85% of the purchase price. Interest-only loans do not qualify and the mortgage must be worth at least 25% of the total cost.
Participating lenders include Barclays, Bank of Scotland, Glasgow Credit Union, Halifax, Lloyds, Nationwide Building Society, Scotwest Credit Union and TSB.
The Government will lend up to 15% of the property’s value, owning an equivalent share until it is repaid or the property is sold, when it will take back this portion of the sale price.
It is vital to take time choosing a first mortgage. According to credit report provider Noddle, borrowers spend longer deciding on a holiday than a home loan.
A quarter do not shop around and grab the first deal they are offered, with the result that a fifth regret their selection.
Noddle points out that taking a poor deal could add £1,500 a year to the cost of a £100,000 loan.
Managing director Jacqueline Dewey said: “The excitement of finding a house you’ve fallen in love with, combined with worries about being accepted for a mortgage, means it can be easy to rush a decision. But when we’re talking about thousands of pounds on the line, it really does pay to do your research.”
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