Embarking on the journey to homeownership has become an uphill battle in the wake of the pandemic. House prices skyrocketed by 14% in the aftermath of COVID-19 and have remained high ever since. Inflation surged to an eye-watering 11.1% at its peak, making it increasingly challenging to save for a deposit as the cost of living soared. And a turbulent mini Budget in 2022 sent mortgage interest rates skyrocketing, with the average two-year fixed rate mortgage hitting 6.85% in August last year, locking many first-time buyers out of the market.
These hurdles can feel overwhelming, but it’s crucial not to lose sight of your goal. By taking proactive steps to get yourself mortgage-ready, aspiring homeowners can inch closer to their dream of owning a place to call their own.
- Create a monthly budget: Begin by meticulously examining your expenses and total monthly outgoings. Understanding your spending habits will identify areas where you can trim expenses to allocate towards your deposit. This process may also reveal the need for additional income. While sticking strictly to a budget may seem mundane, it’s the key to achieving your homeownership goals.
- Understand your affordability: While online mortgage affordability calculators are useful tools, they can only provide a general estimate of your borrowing capacity. To get a more accurate picture of your affordability, speak to a mortgage broker who can assess your circumstances, including irregular income, or bonuses.
- Research your mortgage options: With a multitude of mortgage options on the market, including new products like Yorkshire Building Society’s 99% mortgage aimed at helping renters who find saving for a deposit challenging, thorough research is crucial. It’s essential to compare interest rates because a 99% mortgage can potentially incur higher long-term costs and increased risk. Investigate repayment terms and associated fees carefully to find the most suitable mortgage for your circumstances and seek guidance from a mortgage broker who can offer valuable insights at no cost, helping you to make an informed decision.
- Explore schemes like Deposit Unlock, Shared Ownership and Rent-to-Buy schemes: Deposit Unlock enables first-time buyers to purchase a home with a much smaller deposit than traditionally required, often as low as 5%. The offer is exclusive to new build properties, built only by participating house-building companies, but the mortgage application process is quite straightforward. Shared ownership and rent-to-buy schemes can also help you get a foot on the property ladder with a smaller deposit. These schemes allow you to purchase a share of a property while paying rent on the remaining portion. Over time, you can gradually increase your ownership share until you own the property outright.
- Consider asking for support from loved ones: Seeking help from loved ones can make securing a mortgage easier. One option is a guarantor mortgage, where a loved one promises to cover your payments if you can’t. Another is a Joint Borrower Sole Proprietor mortgage, allowing multiple parties to apply together, boosting affordability. Equity release schemes allow homeowners to access funds tied up in their property, freeing up funds that could assist with a deposit, and a family springboard mortgage enables relatives to provide support through deposits or as guarantors, helping those struggling to secure a mortgage alone.
- Put your savings in the right place to maximise returns: Saving for a deposit is one of the most significant barriers to homeownership for many individuals. Set up a dedicated savings account for your deposit and explore government schemes such as a Lifetime ISA to boost your savings. The size of your deposit significantly influences your chances of mortgage approval and impacts the affordability of borrowing. A larger deposit not only increases the likelihood of acceptance but also reduces borrowing costs.
- Boost your credit score for better mortgage terms: Your credit score holds the key to the best mortgage offers. A higher score not only increases your chances of approval but also secures lower interest rates, saving you money in the long run. Before applying for a mortgage, take the time to check your credit report using free apps like Experian, ClearScore, and Credit Karma to track your score and receive personalised tips on improving it.
- Budget for additional expenses: In addition to your deposit and mortgage repayments, it’s crucial to budget for other expenses that come with homeownership. These include stamp duty (it’s worth noting that from 31st March 2025, stamp duty relief for first-time buyers will return to their previous levels. Many buyers are unaware of the savings they could make by moving now under the current rates) solicitor fees, survey costs, home insurance and the expenses associated with hiring a removal van. Additionally, consider budgeting for decorating and renovation costs, new furniture, council tax, and your monthly utility bills.
To help with this, here are the average costs of the most typical expenses when buying a house:
- Legal fees – £850 – £1,500
- House survey – £300 – £1,500
- Removals – £420 for a one-bed flat
- Mortgage fee – £0 – £2,000
- Valuation fee – £0 – £1,500
- Mortgage broker fee – £0 – £500
- Buildings & contents insurance – from £146 – £152 per annum
- Mortgage protection – from £10 per month
Jack Smithson from the homeownership site Better.co.uk said: “Embarking on homeownership has been a personal battle for me, especially in the post-pandemic turbulence. House prices soared by a staggering 14% after COVID-19, while inflation reached an alarming 11.1%. Saving for a deposit has felt like chasing a moving target, forcing us to put our plans on hold multiple times in the past two years.
“Understanding stamp duty relief eligibility is crucial for first-time buyers like me. Despite never owning a property, my wife’s past ownership five years ago means we lose out on relief which stings. This realisation opened my eyes to how buying a home can quickly drain you of your finances and the need for careful budgeting. I’ve felt so frustrated and I can deeply empathise with others who are in our shoes. We feel locked out of the market and unable to buy a family home.
“Despite all of the setbacks we’re still determined to get our foot on the property ladder and our savings target covers a deposit, stamp duty, legal fees, removals, and an extra 5-10% on top.
“Budgeting, researching your mortgage options, seeking advice from a trusted mortgage broker, improving your credit score, and strategically allocating your savings can all help achieve your dream of homeownership.”
