What to consider when buying your first home as lockdown eases

With the housing market starting to make a soft return following its two month suspension, Rightmove has found that 94% of first-time buyers plan to take the opportunity to get on the property ladder as lockdown restrictions ease.[1]

Whether you are thinking about buying your first home now or in a couple of years, it’s important that you consider the costs that come with buying a house.

The cost of your first home is usually made up of five elements[2]:

Deposit – This is the money you pay upfront towards the cost of your home
Mortgage – A mortgage is a long-term loan from a bank or building society
Stamp Duty – A lump sum tax which you have to pay if you are buying property or land which costs more than £125,000 in England, Wales or Northern Ireland. First time buyers don’t pay stamp duty on properties worth up to £300,000. In Scotland, you need to pay Land and Buildings Transaction Tax instead of Stamp Duty.
Conveyancing fees – Conveyancing is the legal work involved with passing ownership of a property from one owner to another – from the seller to the buyer. You will need to find a solicitor to do this for you
Surveyor fees – You can choose to have surveys done on your property such as a Homebuyer Report or a full structural survey, the costs can vary from £400 to around £2,000

With house prices experiencing high levels of volatility at the moment and property prices having risen sharply in May, many estate agents are warning that any bounce in activity is likely to be short lived and will largely depend on the UK’s economic recovery following coronavirus.

For first-time buyers who are looking to take that first step on the market at the moment, it’s important to not be disheartened as a number of mainstream mortgage lenders announce that they are withdrawing high loan to value mortgages, that are popular amongst first time buyers, from the market.[3] While it is hard to know when activity, and mortgage offers, may return to normal, taking the time now to continue to focus on saving and building up your deposit will sit you in good stead for when the market stabilises.

One way to maximise the money you are saving for a house is through a Lifetime ISA. Available to anyone aged 18-39, a Lifetime ISA (also known as a LISA) is a tax free savings account that you can pay in up to £4,000 each tax year. In addition to any investment growth the LISA achieves, the government will pay a bonus of 25% into the accounts of those saving for their first home or for their retirement, up to a maximum of £1,000 per year.

A Lifetime ISA can help you buy a first home worth up to £450,000 anywhere in the UK and can be combined with another person’s LISA if you are buying the house with someone else, though the house can still not cost more than £450,000 to receive the bonus. At Foresters we offer those who open a Lifetime ISA the option to save regularly from £50 per month or to invest a lump sum of at least £500, top ups of £250 or more can then be made thereafter.

Sally Waterfield, Head of Marketing at Foresters Friendly Society, says: “Buying a home is a monumental step in many people’s lives but it is not something that can be achieved overnight. Particularly in recent months where the property market has seen activity grind to a halt, it’s great to see this hasn’t dampened buyer demand.

“For first-time buyers who may have been put off by market uncertainty, it’s important to not lose hope and ensure your savings work at their hardest. If you haven’t already opened a Lifetime ISA, it may be worth considering. With interest rates on savings accounts at record lows the guarantee, of a 25% bonus that could see the government turn your £4,000 into £5,000, is unrivalled.”

Find out more about our Lifetime ISA and request an information pack today.

You may get back less than you have paid in. Tax rules might change and depend on individual circumstances. We do not offer financial advice. If you’re unsure as to the suitability of a product you should seek advice from a Financial Adviser. You may have to pay for this service.

[1] https://www.rightmove.co.uk/news/articles/property-news/how-much-have-homes-sold-for-in-your-area/

[2] https://www.forestersfriendlysociety.co.uk/how-much-does-it-actually-cost-to-buy-your-first-home-what-first-time-buyers-need-to-know

[3] https://www.ftadviser.com/mortgages/2020/06/09/lenders-withdraw-90-ltv-mortgages-amid-high-demand/