Many mature readers of this Huddersfield property market blog will
remember buying their first home as 20 or 30 somethings, probably in Huddersfield
many years ago, yet read the newspapers now and feel it is all doom and gloom
for todays’ first-time buyers.
So, I wanted to look at the facts, instead of newspaper headlines.
Back in 1995, the average Huddersfield
first time buyers house cost £23,990, whilst official figures state today it is
£83,600
So, looking at today’s property prices, it could be perceived that
owning a home is beyond the reach of most Huddersfield first time buyers and
that renting is the only way for younger members of Huddersfield society to
have a roof over their head .. or is it?
100% mortgages (so no deposit needed to be saved) were rife in the
2000’s and Northern Rock were famous for their 125% mortgages (i.e. you
borrowed 25% more than what you were paying for the house, again with no
deposit). Yet when the credit crunch hit in 2008 such mortgages disappeared
overnight – ending the dream of homeownership for many. Yet would it surprise
you to hear that 95% mortgages (i.e. the first-time buyer would need
to save a 5% deposit) have been available since late 2009 and 100%
mortgages (i.e. no deposit) were made available in 2016.
It is £77 per month cheaper to buy a
typical Huddersfield first-time buyer home than to rent the equivalent property.
Prospective Huddersfield first-time
buyers could make a saving of £926 per year on average if they moved from
renting to owning. My calculations assume that first-time buyers raise a
deposit of just 5 per cent and make mortgage payments over 35 years with the
Barclays 95% mortgage with a fixed interest rate of 2.48 per cent interest.
At this level…
Today,
the average deposit needed by a
Huddersfield
first-time buyer is £4,180
Those able to raise that deposit,
would pay £295 pm on average in mortgage payments, while the average rent
for the same property would be £372 pm and the household income to support such
a mortgage would only need to be from £17,376496 pa.
Of course, buying your first home
is a massive financial commitment and investment with up-front costs to ponder
on, yet long-term the financial benefits can be substantial. With annual
savings of £926 a year, this can really mount up over time and, of course, once
the mortgage is paid off, one will have a valuable asset.
Yet,
the elephant in the room is the raising of the 5% deposit
Well most first time buyers, even
most of you who are now in your 50’s and 60’s may have used the Bank of Mum and
Dad to help with the deposit, yet it’s only fair that most
parents still expect their offspring to contribute to the deposit and
this is where it comes down to choice. I have spoken to many of my friends and
family to reconfirm my initial thoughts that it comes down to priorities and
choices in life. To save the deposit mentioned above, sacrifices are required
to save that amount of money.
According to a
survey in 2018, the average millennial goes out two nights a week and spends on
average £63.36 per night out, that’s nearly £6,600 per year - a very expensive
hobby. Nearly a third of millennials surveyed had smashed their mobile phone in
the last 12 months. Then there is the obsession of having the latest tech, with
the need to constantly be upgrading one’s mobile phone. In fact, the cost of the
brand new iphone11, recently released, is just shy of £900. Even those on
contracts can expect to pay upwards of £80 per month for the newest phone
upgrade, yet if they kept their old phone after two years, a sim only deal with
the same minutes and data would set them back no more than £25 per month … it
comes down to choices. Save for a deposit and reduce your expenditure on
socialising and mobiles etc and have a valuable asset at the end of your
mortgage or continue as you are.
I am not here
to make a judgement – everyone is free to make their own choices in life – all
I am doing is highlighting the real situation - so you are aware of the full
story.
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