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First time buyers could be nearly £700 per year better off

By 25 August 2015 Home

As crazy as it sounds, it can actually be cheaper to own your own home than rent. New research just released by the Halifax has shown that for first time buyers owning a property is £670 cheaper per year than renting. So not only are you lining your landlord’s pockets you’re emptying your own.

The research has found that a first time buyer purchasing a three bedroom house in the UK is paying out on average £666 per month. In contrast, the rent on a similar property would be 8% more at £722 per month. For many of us stuck renting, for now at least, this could be quite depressing. The bright side is that if you’re currently saving hard for a deposit, there is light at the end of the tunnel. Once you get into your new home, you might actually be better off. That £700 could buy a nice little holiday or perhaps a new sofa.

If, like me, you have a few years before you’ll have a house deposit in place, you might share my concerns that with rising house prices you’re never going to have enough to buy the property that you want. The number of first time buyer house sales has decreased over the last few months, although there are still more people climbing onto the first rung of the property ladder than this time last year. Figures from the Housing Market Report state that in July 2015 first time buyers accounted for 23% of all sales, compared with 24% in June and 29% in May. However, in July 2014, only 20% of sales were made to first time buyers.

Mark Hayward, National Association of Estate Agents managing director, is alarmed that the number of sales made to first time buyers is falling. “With reports of house prices increasing and expectations of rising in the future, first time buyers will continue to be pushed out of the market,” he added.

Not the most encouraging of remarks, however I don’t think I’ll ever be put off from buying a house. I know that being secure in your own home relies on you being able to keep up the mortgage payments but I don’t feel happy with the idea of bringing up children in a rented property that the landlord can literally just turf you out of whenever they feel like it.

In a world of increasing property prices and increasing numbers of people having to remain in rented accommodation, I really wish someone would look at assured shorthold tenancies and do something to make the tenant feel more secure. During the run up to the general election, the Labour party talked about introducing secure 3 year tenancies as standard. This pledge alone almost made me vote for them.

Plus, I like the idea of owning my own home and not having to pay rent when I get old. I can’t imagine there’s going to be a state pension by the time we get to retirement age and having to continue to pay rent each month could be really stressful and potentially impossible for many.

For those of you already paying a mortgage, how do you find it compares to your previous monthly rent? Or perhaps you’re looking at mortgages at the moment. How do your monthly repayments stack up? Let us know in the comments below.

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Help to Buy ISA providers announced

By 9 August 2015 Money

The Help to Buy ISA was announced in the Government’s Budget back in March. It aims to give first time buyers’ deposits a boost by giving them an additional £50 for every £200 saved. Read what the Budget 2015 means for first time buyers to find out more.

From 1st December 2015, the Help to Buy ISA will be available and six banks/building societies have already signed up to the scheme. These are Lloyds, Barclays, Natwest, Nationwide, Santander and Virgin Money. It’s possible to open the account with £1000 and earn an additional £200 from the Government that month. After your first deposit, it’s only possible to invest a maximum of £200 per month so it’s worth opening the Help to Buy ISA with that maximum amount.

The maximum contribution from the Government is £3000. You’ll need to pay in £12000 to get this, which gives you a total of £15000 towards your deposit. The bonus will only be paid to you when purchasing a house so you won’t be able to use your Help to Buy ISA to get free money to do whatever you like with. Shame…

The lenders will set their own interest rates so once they’re released it’ll be worth shopping around for the best rate. It’s also not possible to have more than one cash ISA (which the Help to Buy ISA counts as) during one tax year. This means that in the year that you’re planning on opening a Help to Buy ISA you need to make sure you don’t open, or pay into, another cash ISA.

Martin Lewis, founder of MoneySavingExpert.com, predicts:

“Banks that want to sell you a mortgage may well offer stronger rates for Help to Buy ISAs than normal ISAs, in the hope that they can cross-sell you their mortgages later on. This is especially likely because you can only put a relatively small amount in a Help to Buy ISA each year, so it isn’t that expensive for them to pump out loss leading rates. Only time will tell though.”

The Help to Buy ISA will be available to open until December 2019. Once open you can keep it indefinitely. What’s great is that you can have one per person, so if you’re saving as a couple to buy a house so can each pay in £200 per month and each benefit from the bonus. I plan to do this with my husband so we can save more quickly. We’re aiming to have enough money for a deposit in 2 years. But that’s only because we’re planning on moving away from Kent to somewhere we can actually afford to buy a house. This BBC calculator is pretty interesting as it shows you where you can afford to live: Where the BBC affordability says I can afford to live As you can see, this rules out most of the UK for me! We might move to Yorkshire, where it’s possible to buy a lovely 3 bedroom house for £140,000.

Critics have pointed out that £12000 isn’t enough of a deposit for most people and that’s probably true. But don’t forget buying as a couple gives you £24000, which is much more like it. Yes, in some areas this still isn’t enough but you can still save additional money in another savings account if you want.

What do you think of the Help to Buy ISA? Will it help you? Let us know in the comments below.

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