Schemes for helping first-time buyers in London
Generation Rent refers to the millennials (18 – 40-year-olds) who have been priced out of the housing market, and face difficulties making it onto the property ladder for various reasons. Here are several contributing factors to the problems faced in the UK for Generation Rent.
- High living costs, student loan repayments, and low wage growth inhibit their ability to move out of this situation.
- Rising house prices, where house prices have risen faster than inflation in the last decades
- Due to a housing shortage, rental prices are also climbing. For workers in London, renters can pay up to 50% of their income in rent.
The major issue in London and the UK is that demand outweighs supply, there is simply not enough housing. However, there are few government schemes worth knowing about which may help that first rung of the property ladder become a reality for some.
Schemes for assisting first-time buyers in London.
The Mayor of London offers several programs for low and modest income Londoner’s to avoid the rental cycle and set up a pathway for home ownership.
1. The Shared Ownership Scheme is where you buy a percentage of your home, which is usually ¼ or ¾ of the property’s value. You can then purchase the remaining share later, in installments, a process called staircasing. This scheme suits people who have a small deposit amount and are looking for a property within a modest value range. The ceiling limit is £600, 000 in total. The standard deposit amount is 5% of the total value, which is much lower than most mortgage deposits. In addition to that, stamp duty can generally be deferred until you increase your share of the property to 80%.
Eligibility hinges on whether these factors are true for you.
- You have a gross household income of no more than £90,000 a year
- You are an existing shared owner
- You do not already own a home or have sold your home before your purchase
- You are unable to buy a property that suits your needs on the open market
The Home Owners Alliance details some of the drawbacks of the Shared Ownership Scheme, which are worth considering in detail. Most of these properties are leasehold, and involve maintenance costs. There are also other hidden costs to be aware of, as well as restrictions, like not being able to rent out the property. Reading through their website carefully will give you an idea of whether this is a realistic approach for you to work towards.
2. First Dibs for Londoners is a scheme that ensures that new-build lower cost housing is marketed and sold to Londoners and UK based buyers first time buyers. This means newly built property in the city cannot be bought up by foreign investment.
3. The Help to Buy Equity loan is a loan to help people buy a new build home as a first-time buyer. Homebuyers contribute 80% of the home’s price, with a 5% deposit, and up to 75% mortgage. Since 2013, just shy of 340,000 homes have been bought using the equity loan scheme. While you pay no interest on the loan for the first 5 years, there are drawbacks to consider if you do not pay back after 10 years. Beyond 10 years the cost in interest can spiral as house prices rise. An equity loan will likely start costing you more in interest than a standard mortgage if you keep the equity loan for more than a decade. The difference in cost becomes most pronounced if you don’t pay back the equity loan until the end of your mortgage term, for example, after 25 years. Consider your situation carefully and factor in the potential for house prices to rise, while you end up paying back more than your original loan.
75% mortgage. In London, homebuyers must contribute at least 60% of the home
West London shared ownership scheme developments
Several West London shared ownership scheme developments are set to benefit from the Crossrail line. If you are interested in getting on the ladder in some of the city’s up-and-coming areas, you may want to research these options. Over the next decades, these developments are set to provide some of the capital’s new and much needed housing.
- Evolution in Southall
- Hanwell Square Hanwell
- Liberty Wharf Alperton
- Regency Heights in Park Royal
Right to buy
Recently the Right to Buy scheme hit the headlines again. This scheme which began in the 1980’s allowed council tenants to buy their own homes with considerable discounts. For houses, the discount is 35% if you have been a public housing tenant for three to five years. In London, the maximum discount is £116,200 and that can increase with the consumer price index. Discounts are evaluated based on each property, length of tenancy, and the value of the property. The discount rises by 1% for every year you have been a tenant of public housing. At 70% this is capped, or alternatively if it exceeds the £116,200 maximum. For flats, the discount is 50% and it rises by 2% under the same capping restraints. Discounts are subject to different factors including the costs of maintenance to the landlord. In recent news, this has been posited as a solution for the problems facing Generation Rent with the implication that this Right to Buy will also extend to Housing Association tenants. These schemes require already being registered with the Housing Association, or as a council housing tenant.
Tips on How to Secure Your First Home in London –
- Research your options and which of these schemes is the best for you, also see what areas in London are viable and desirable for you so you are motivated to work towards your goal. Be realistic about what is possible to avoid a situation where your costs increase beyond your income.
- Start saving for the deposit and securing the monthly income required for the scheme you are going to apply for.
- Adjust your lifestyle and living costs accordingly, budgeting is a great strategy and can be rewarding when you see the result pay off.
- Get support from your friends and family and any other government programs, or housing associations which can support you work towards your goal.
Safe Removals – We’re Here to Move You into Your New Home in London
We believe everyone deserves to live in a safe and affordable home. At Safe Removals we celebrate any step that is taken in London to solve housing inequality and prohibitive housing pricing. Despite the race for space in the pandemic years, many people are still very keen to live in the metropolis. With these schemes and new housing developments, plus the addition of Crossrail, it is possible to break out of the rental cycle and have your own London address.
When that day comes, we will be there to help you with the big move. Safe Removals work with thousands of first-time buyers in London every year. We are happy to share this great achievement with you and lend our expertise to your situation. Our prices are below the market rates, so we are the low-cost choice, that can guarantee you first-class service.
We have a range of domestic and business removals packages to suit everyone’s needs. Even if you’re moving into a smaller property to save money, we have an affordable removals service that will meet your requirements.
For more information about our removals and related services, contact us today.