There has been a lot of talk about house prices in the UK recently. Though buying a house is a complicated process that requires extensive financial preparation and planning, here are some reasons why now is an exciting time for aspiring homeowners, both those looking to buy now and those saving to buy later.
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What has happened to house prices in the last year?
While the first lockdown initially brought the housing market to a standstill, it has been on the rise since it reopened in May 2020.
Buyers looking for extra rooms and outdoor space boosted housing demand. The increased demand, combined with low housing inventory, drove up house prices.
In the last year, house prices have surged by more than 7%. In 2021 alone, experts forecast that house prices could rise by up to 5%.
Why is now an exciting time for aspiring homeowners?
According to Ella Pumford, content manager at St. Modwen Homes, now is an exciting time for aspiring buyers, particularly first-time buyers.
Even though prices are up, there’s a wide range of government financial incentives and schemes available to make owning a home an affordable reality.
There are three government schemes that buyers can take advantage of at present.
1. Stamp duty holiday
Under the stamp duty holiday, which was introduced in July 2020, buyers don’t pay tax on the first £500,000 of any house purchase.
This scheme was set to end at the end of March. It has since been extended until the end of June. Buying a property before this deadline could save you as much as £15,000.
The good news is that the opportunity to save on stamp duty can be extended beyond June based on your buying choices.
For example, some home builders have a special stamp duty holiday extension available for certain homes. So, doing your homework could help you save on stamp duty even after June’s deadline.
2. 5% mortgage
5% mortgages disappeared during the pandemic due to their perceived higher risk, but now they’re back.
Under the government’s new mortgage guarantee scheme, buyers can secure a mortgage with just a 5% deposit for properties worth up to £600,000.
The government will give lenders the guarantee they need to offer mortgages that cover the other 95%. This scheme ends in December 2022.
3. Help to Buy: Equity Loan
Under this scheme, which is only available to first-time buyers, the government will give you an equity loan of up to 20% (40% if in London) of a property’s value to top up your deposit. However, you must come up with a 5% deposit on your own.
Why is now a good time to save for a house?
As Pumford says, even if it does not appear to be the best time for you to buy right now, it’s always the best time to save for a house. The availability of products such as Lifetime ISAs means that you can prepare for your home-buying journey.
With a Lifetime ISA, you can save up to £4,000 each year. The government will top it up by 25% at the end of the tax year. You will be able to use the money when you buy your first home or access it after you hit 60.
Remember that when it comes to saving for a house, the goal should be to save as much as possible. That’s because the larger your deposit, the lower your mortgage rates are likely to be.
One thing worth keeping in mind is that buying a house immediately might not always be the best move. In fact, rushing into a purchase can end up costing more than the house is worth.
That is why, rather than focusing solely on timing, it may be more beneficial to first focus on finding the right home for your needs and financial situation. After that, you can see whether timing can help you save even more money overall.
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