First-time buyers in the South East: Three tips for affording your first home

The South East is known for many things; expansive countryside, historical buildings and being the ‘garden of England’ to name a few. However, if you are a first-time buyer in the region, one key fact is likely to stand out:

Outside of London, the South East is the most expensive area to buy a home in England. According to the Land Registry’s March 2018 report, first-time buyers in the region can expect to spend an average of £256,291 on the property alone, more than £50,000 above the national median of £201,635.

Of course, with higher house prices comes the need to save a larger deposit. So, what are the options facing you as a first-time buyer in one of the most expensive areas of England?

1. Look elsewhere

If saving a deposit to buy a home in an expensive area such as the South East feels impossible, you could consider buying your first home in a more affordable location.

Of course, we know that’s easier said than done and that emotional, employment and family connections might mean moving to the other end of the country is simply not a viable option. However, even looking beyond the borders of the South East could bring the cost of buying your first home down significantly. For example, the average cost for first-time buyers in the South West is £205,322, just £3,687 over the national average.

If there’s nothing stopping you from making a bigger relocation, you may wish to explore some of the areas with the lowest costs for first-time buyers. The cheapest region is the North East, where the average first home will set you back £106,680, and save you £150,000, compared to the South East. Yorkshire & the Humber and the North West both offer an average first-time buyer property price of less than £133,000, which is just over half of the average in the South East.

2. Effective savings

While there are many things which can affect how quickly you build up your deposit, one of the biggest factors is where you choose to keep the money while saving. A financial adviser or planner will be able to suggest how your money could be best placed to suit your individual needs, but you can start to consider:

Purpose-built accounts: Some saving accounts are designed with first-time buyers in mind. Examples of this include Help to Buy ISAs and Lifetime ISAs; both of which attract 25% government bonuses on the money put into them each year. These accounts offer a tax-efficient way of saving. However, they both also have age limits and a cap on how much you can contribute each tax year:

For a Help to Buy ISA, you must be 16 or over. You can contribute up to £1,200 in the first month of opening the account, and £200 every month thereafter. The maximum Government bonus you can get with a Help to Buy ISA is £3,000.

A Lifetime ISA can be opened by anyone aged 18-39 and you are able to deposit up to £4,000 each year. You will also be able to transfer any savings in your Help to Buy ISA into your Lifetime ISA, without affecting your remaining Allowance.

The Lifetime ISA rules mean you’ll have to wait at least a year before you can use one to buy a home. The Help to Buy ISA, on the other hand, will pay out a maximum bonus of £400 after just three months once you’ve got £1,600 in total – you’ll need to put in the maximum amount of £1,200 in month one, and £200 in month two and three.

Both ISAs are available in Cash and Stocks & Shares accounts. But which is best for you?

Cash or Stocks & Shares: Cash saving accounts are often the safer option for short-term savings, such as those used to buy a house. This is because a savings account does not carry the same risks as a Stocks & Shares ISA. While the potential growth of Stocks & Shares ISAs can be attractive and may seem like they will help you to achieve your goal deposit faster, the risk of losing money to market wobbles in the short term, means that these account types are better suited to long-term investments which will have longer to level out and potentially generate returns.

Asking for help: If you are lucky enough to have family members who can put money toward your deposit, then asking them for help could help you to meet your goal. However, if making a large withdrawal from the bank of mum and dad isn’t an option, you could consider asking for one-off contributions toward your deposit instead of birthday or holiday gifts.

3. Take advantage of the help available

There are schemes in place to help first-time buyers access the market, meaning that buying your first home could be less stressful than you first imagine. These include:

  • Help to Buy – Equity loan: A government-backed scheme which breaks the cost of a home into three parts: A 5% deposit paid by you, a 20% loan (40% in London), with interest-free repayments for the first five years and a 75% mortgage.
  • 95% and 100% mortgages: Mortgages with low, or no deposit, which often require a lump sum to be deposited into an account as security.
  • Shared ownership: A scheme which allows you to buy your home incrementally and pay rent on the remainder. This is usually offered by housing associations.

With all big financial journeys and decisions, we recommend seeking professional advice from a financial planner or adviser. To discuss your options in more detail, feel free to contact us.

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