First-time buyer prospects in 2021

Did you know the pandemic did little to dent the buying actions of first-time buyers last year? Those purchasing their first-ever property were out in force, according to analysis by the Halifax. In fact, first-time buyers accounted for half of all home purchases in 2020 and there are no signs of the momentum slowing.

The Halifax also revealed that the average price paid by a UK first-time buyer in 2020 was £256,057, up by £22,939 (10%) from a year earlier (£233,118), with the average deposit standing at £57,278 – 23% more when compared to the previous 12 months.

If you’re a first-time buyer considering your inaugural property purchase in 2021, there are positive prospects ahead. Below are some of the initiatives and forthcoming ideas that may make it a little easier to get a foot on the housing ladder.

Help to Buy in 2021

The Government’s Help to Buy scheme is now exclusively reserved for first-time buyers who are purchasing brand new homes, with a new round of the initiative open between 1st April 2021 and April 2023. The scheme comprises the following three parts: a 5% cash deposit provided by the purchaser; a 20% equity loan provided by the Government and a mortgage to fund the remaining 75% of the purchase price.

We can help you work out your figures and explain the new fixed ‘regional full purchase price caps’ – upper price limits that depend on where the property is located in the country.  

5% deposit open-market mortgages

It was in October 2020 when the Prime Minister announced the come-back of mortgages that require a deposit as low as 5%. It is hoped the scheme will help 2 million people take their first step on the homeownership ladder, changing Generation Rent into Generation Buy. No launch date has been announced but we expect to see the first 95% mortgages – with long-term fixed rates – become available at some point during 2021.

Stamp duty thresholds

Choose your property value wisely and there could be no or a smaller stamp duty bill to pay. Even outside of the current stamp duty holiday, there is no stamp duty to pay on homes up to £125,000 in value. Buy a home worth £250,000 or less and the stamp duty bill will be £2,500 from the 1st April 2021. 

With the Budget scheduled for early March this year, we are watching to see if there are further changes to stamp duty rates – with a rumour that the ‘zero tax’ threshold may rise from £125,000 to £300,000. Please check with us for the latest stamp duty details, as we’ll use this information to calculate the bill attached to a property you are interested in buying. 

New ‘blended’ mortgages

A leading economist, a member of the influential Policy Exchange and a long-term adviser to Boris Johnson, highlighted how many renters can afford mortgage repayments but struggle to save for a deposit. As a solution, Gerard Lyons suggests a new type of ‘blended’ mortgage should be introduced. This would allow people to buy with a 5% deposit, by splitting the home loan into three parts to reduce any risk faced by lenders: 85% to 95% provided by investment banks, with retail banks, building societies and long-term investors (such as pension funds) providing the balance. 

We’d be delighted to help you buy your first home. Get in touch and we can assist with budgeting and your property search.