This March, Labour’s Chancellor of the Exchequer, Alistair Darling, announced he would be temporarily waiving the stamp duty tax for first time buyers of homes up to the value of 250,000.
Politically motivated or otherwise, the news was welcomed by most as positive gesture to young, first time buyers who – despite depressed house prices – still struggle to get their foot onto the first rung of the property ladder.
Aside from the fees associated by buying a property, other barriers young people face include saving up enough money for a deposit. Given the turbulence of the property and mortgage markets over the past two years, lenders are now more restrictive with whom they lend to. The borrower must usually save at least 10 per cent of the mortgage value they wish to borrow, although in reality this figure is often far higher.
As the Communications Manager at the Council of Mortgage Lenders, Bernard Clarke, explains: “On average, now, [the deposit is] 25 per cent of the cost of the property, which is a very significant amount of money for a first-time buyer to acquire”.
Many must therefore rely on the so-called ‘Bank of Mum and Dad’ or team up with friends or partners so that they can afford to put a deposit down. According to the British Property Federation it would take the average 25 year old 18 years to save up 33,000 – the typical amount needed.
This clearly poses a difficult problem for people keen to own their own home and to counteract this the Government has initiated the HomeBuy Direct scheme. In the scheme, people who are unable to afford a home themselves are able to purchase a new build property, assigned by the developer, through an equity loan of up to 30 per cent of the purchase price. This is jointly funded by the developer and the Government. The remaining 70% must be financed by the purchaser.
Further schemes devised by developers are also available to help first time buyers and key workers onto the property market. Barratt Homes is one such example, and offers schemes such as Shared Equity, Head Start and Parent Power.
Philip Youngwood writes on a number of topics relating to property including first time buyers and stamp duty.
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