23 December 2014
Top tips for first-time buyers in 2015
Christopher Johnson, Lead Mortgage Product Manager at Principality Building Society, outlines his top tips for first-time buyers looking to get on the property ladder in 2015.
January is typically a time when people reflect on their lives and decide what changes they want to make for the year ahead. And what change could be bigger than getting on to the property ladder for the first time? Buying a home is one of the biggest financial commitments most people are ever likely to make, so it’s crucial to arm yourself with as much information as you can in order to make the process as stress-free as possible.
Fortunately, for anyone dreaming of securing their first home in 2015, conditions are looking positive for the next 12 months, meaning this could be the year many are able to ramp up the search for their ideal home.
Reductions to stamp duty made effective following December’s Autumn Statement have cut the amount that tax buyers must pay the Government when purchasing a new home, reducing overall costs for many.
Under previous rules, homeowners with a budget of between £125,000 to £250,000 had to pay 1% of the total value of their new home in tax on top of the sale price, and 3% of the total purchase price if the property cost between £250,000 and £500,000. But under the new rules there is no tax to pay on the first £125,000; and buyers pay 2% on just the extra portion of the value between £125,000 and £250,000, and 5% of the extra portion up to £925,000.
As the average price of UK homes now stands somewhere in the middle of this range, this is particularly good news for first-time buyers, who can now expect to pay a third of the cost in stamp duty on a house worth £150,000, for example, compared to that payable under the old rules.
On top of this, interest rates look set to remain low for longer than initially thought. Set unprecedentedly low by the Bank of England in recent years to help drive economic recovery, the cost of borrowing for mortgage holders has been lower in recent years. Despite the financial news agenda in the last half of 2014 being dominated by an anticipated sharp rise in interest rates, this has not occurred, however, leading to revised predictions and a feeling that an imminent increase is unlikely until late in 2015 or early 2016. It therefore remains an encouraging time for those looking to get onto the housing ladder for the first time.
This is not to say a future rise should not be taken into consideration when calculating repayments on a new property though and all homeowners, whether first-time buyers or not, should make sure they are prepared for a possible increase in payments when rates do inevitably rise. Although, most lenders will have been doing this for some time during the mortgage process.
For anyone considering making that first crucial step into home ownership in 2015 there are also other things to consider before making your choices. It’s important to borrow within your means and consider any potential changes to your income that could occur in future years as a result of career or other life developments seriously before making that first purchase.
Securing a deposit is also absolutely crucial. In the current market you can expect to pay a minimum of five per cent of the purchase price and you must be able to achieve this either on your own or through support from a government scheme – such as the Help to Buy scheme in Wales - before you can consider buying.
Job security and a regular income are other necessities. Mortgage-lenders will want the reassurance that you’re not borrowing more than your salary allows. Also, do some research to find out if you have a good credit rating. This will be easy enough to do with some online research. If your rating is poor you may need to look into spending time getting your finances in order so that you can improve it before you can consider buying.
A seemingly small detail that may also slip your mind when going through the buying process are the extra costs you need to consider in terms of utilities and other bills, such as Council Tax. Contact the local council when you are interested in buying a house to check how much this will be before you buy, to avoid any nasty surprises once you’ve moved in.
Another prudent measure is to ask the seller for the Energy Performance Certificate, to ascertain how energy efficient the property is. If it’s not efficient, you may have to look into the cost of installing insulation, which many government schemes can help subsidise, or even decide to abandon the property in favour of a more energy-efficient option.
Either way, it’s better to know each of these details before putting in your offer, and it’s always important not to rush into any decisions when buying a house. But if getting on the property ladder is something you’ve been considering, then 2015 could be a good time to take the plunge.