The current property boom in Edinburgh and across much of Scotland may be good news for some, but for much of the population it is a reminder of how unequal home ownership has become.
A decade of rising property prices and stagnant wage growth has created the ideal environment to deprive an entire generation of the benefits of owner-occupation.
Without more help, many of those in their forties and younger will continue to regard home ownership as something their parents did.
Last year a report by the Office of National Statistics (ONS) reported that a third of 35-44-year-olds were renting from private landlords, compared with fewer than one in ten in 1997.
The ONS said home ownership had become increasingly concentrated among the over sixty-fives with around 75% of baby boomers – adults born just after the second world war – owning their homes outright, up from just over half in 1993.
Meanwhile, millennials – those who reached voting age around the turn of the millennium – are increasingly seen as a ‘lost generation’ when it comes to property ownership.
A report by the Resolution Foundation in 2018 suggested that, despite historically low interest rates, up to a third of 20-35-year-olds may never own their own home.
Becoming a first-time buyer in the modern age can be a scary prospect, not least because of the amount of money involved, but it is still possible.
By making a few minor changes to your life, getting the right advice, and taking advantage of the best opportunities out there, you could soon be taking your first step on the property ladder.
Here are a few tips on how to pull together a deposit
Save regularly. The average amount put down by a first-time buyer in Scotland last year was £35,745 – it sounds a lot but across the UK the average was £57,278. A deposit is a proportion of the property’s value, usually around 10%, so the lower the selling price, the lower the deposit. The average property price in Scotland is currently £200,000 and, in Edinburgh, it is just under £280,000. To make saving for a deposit easier why not move back home for a while to save on the cost on rent and bills, even if you pay a low rent to your mum and dad while you’re there. Alternatively, rent a room in a house share rather than a property on your own – bills in Houses in Multiple Occupation (HMOs) are usually included, too, which makes budgeting easier.
Take advantage of government support. The Scottish Government has introduced several schemes to help first time buyers, although some are closed to new applications for this year, at least. Help to Buy is an equity loan scheme where you provide a five percent deposit and the Government loans you up to 20%, interest free for the first five years. The LIFT (Low-Cost Initiative for First Time Buyers) Open Market Shared Equity (OMSE) scheme helps first-time buyers and other priority groups to buy a home if they have a low to moderate income. Through it, buyers can get up to 40% towards the price of a home bought on the open market, from a Scottish Government contribution. Buyers fund the remainder themselves, usually through a combination of mortgage and deposit, and own the property outright.
Reduce your bills. If you’re renting, saving on your bills and other outgoings can go a long way towards helping build a deposit. Get into the habit of regularly shopping around for cheaper energy and broadband providers. Avoid signing up to long-term contracts, to allow you to switch more regularly, when a better deal becomes available. Use a less expensive mobile phone on a cheap, SIM only deal. When doing your weekly shop, consider supermarket own brands and look out for online voucher deals.
Pay off your debts. People with debts can find it harder to borrow and arrears can affect the amount mortgage lenders will provide. Pay off credit and store cards before exploring mortgage options. As well as maximising your borrowing potential, it will show potential lender you’re sensible when borrowing money.
Sort out your credit score. Everyone has a credit score and it can influence lenders’ decisions to offer you a mortgage as well as how much they will be willing to loan you. Missing payments on mobile phones and broadband can affect your score, so make sure you pay them on time and in full. Also, if you have a credit card, make sure you pay what’s due, in full every month, rather than the minimum amount. This will show lenders you’re responsible with money and can be relied upon to make regular payments.
Grow your income. Even if you have a full-time job, you can earn extra money through online shopping cashback and selling unwanted items on eBay. You can get temporary and part-time jobs, for example as an evening bartender or working for the Royal Mail at Christmas.
Change your car. Having a car loan will affect your mortgage borrowing ability as it will be classed as a debt. Regular car payments could also hinder your saving, so consider buying an older car for cash. Reduce your running costs by going to a local mechanic rather than a showroom and find the cheapest petrol station in your area and use it.
For more information on properties for first time buyers in your area call Purdie & Co on 0131 346 7240 or visit www.purdiesolicitors.co.uk