Happy first time home buyers

Thinking about buying your first home in 2022? It can seem like a complicated process, but if you do your homework in advance, seek independent agent advice and get your paperwork organised, it really will feel less daunting and more exciting.

1. How much of a deposit do you need?

Saving up sufficient funds for a deposit is a major challenge for many who would love to buy their first home, especially with the rise in property prices during 2021. On a positive note, lenders have reintroduced 95% mortgages, which were withdrawn at the start of the pandemic.

Average first property price in England is £239,659 (based on data from Land Registry 2021), and requires a 5% deposit of £11,983 or a 10% deposit of £23,966.

2. What will you be able to borrow?

In the first instance, any lender or mortgage broker will review your financial situation before agreeing to a mortgage loan. Generally, a building society or bank will allow you to borrow four and a half times your annual household income, although this can vary between individual lenders. The Bank of England is currently consulting on some of the measures lenders currently use to determine affordability for borrowers.

3. Changes to mortgage interest rates

Inflation is rising and the Bank of England has raised the base rate, so interest rates could continue to rise slowly during 2022. However, this is not a cause for worry, especially if you’ve only got a small deposit as mortgages with a higher loan to value (LTV) because lenders already charge a higher interest rate for these loans. Earlier this month, average rates on 95% mortgages hit the lowest levels on record, so even a small rise in 2022 would still leave you better off compared to those who bought over most of the last decade.

4. What other costs do you need to consider?

You’ll also need to factor in additional costs of moving to cover tax, legal work and removals costs. The biggest additional cost of moving is stamp duty, but the good news is most first-time buyers don’t need to pay the tax. If you’re buying in England or Northern Ireland, you can buy a home for up to £300,000 tax-free. Recent figures suggest that first-time buyers spend an average of £2,082 in additional costs, consisting of £1,260 in legal fees, £450 on house surveys and £372 on removals.

5. Do you know what’s happening to house prices in this area?

There’s no getting away from the fact that locally and nationally house prices has gone up during 2021, largely because of a shortage of stock and as this continues, there’s unlikely to be a drop during 2022 – but the good news is that the rate of increase is likely to slow. Rises are predicted of around 3-3.5%, well below the 10% increases seen in some areas in 2021. It’s worth doing some homework on property portals and looking in your local estate agencies to see exactly what’s happening in your area. The Land Registry’s price paid tool allows you to see recent house sales in specific streets and towns, while its interactive house price index allows you to track house price trends in any local authority. The government plans to grow its First Homes scheme which could see more first-time buyers purchase properties at a discounted rate.

If you are thinking of buying a home in 2022, our advice is to do your property research and do make use of your local independent estate agent, who can give you a good insight into prices and properties in the areas you are considering. Don’t rush to make a decision or let your heart overtake your head, but also be decisive, as the sooner you get on to the property ladder, the quicker you will enjoy being a homeowner.

Happy house hunting!