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How first-time buyers can get on the property ladder in 2018

Mortgage deals and stamp duty cuts could offer buyers a boost

How first-time buyers can get on the property ladder in 2018

With stamp duty cuts, mortgage rates stabilising and the promise of a hike in housebuilding numbers, things are have started to look a little rosier for first-time buyers, but are these reforms all that they seem?

Here, we consider what could be in store for people looking to buy their first home in 2018.


2018 could be the year of the 95% mortgage

Major banks have traditionally steered clear of headline-grabbing deals for first-time buyers with small deposits, but this could be set to change in 2018.

Since the Bank of England increased the base rate to 0.5% and the government announced stamp duty cuts for first-time buyers, Barclays has relaunched it’s 95% mortgages and Yorkshire Building Society announced a chart-topping fixed-rate deal.

And as mortgage interest rates have begun to rise at other loan-to-value (LTV) levels, those at 95% LTV have stabilised.

While we don’t have a crystal ball to predict what will happen to mortgage deals in 2018, it wouldn’t be a huge surprise to see some other major lenders rejoining the 95% market.

  • If you’ve only got a small deposit, a building society might offer you a better deal than a major bank. Learn more in our story on who offers the best 95% mortgages.

More new homes could become available

The government is targeting the creation 300,000 new homes a year by the mid-2020s, but such a figure remains a long way off.

In 2016-17, 216,000 homes were built, and with the continuing popularity of the Help to Buy equity loan scheme propping up developer profits, this number could well increase in 2018.

At this stage, it still remains to be seen if and when the long mooted Starter Homes Initiative, which pledged to offer properties at a 20% discount to first-time buyers, will come to fruition.

Stamp duty reforms to offer respite for some

The much-discussed stamp duty cut for first-time buyers announced in the Autumn Budget will provide a boost for some, but will make very little difference to others.

The headline grabbing announcement that buyers could save up to £5,000 is certainly the case in London – where the bill on an average priced first-time buyer home (£419,793) will drop from £10,989 to £5,990.

Elsewhere, however, the difference will be smaller, with a first-time buyer in England saving £1,553, based on the average first home price of £201,657. You can use our up-to-date stamp duty calculator to find out how much you’ll pay.

Help to Buy will aid first-time buyers – at a cost

For many first-time buyers, the government’s Help to Buy scheme offers a route into home ownership.

With the promise of a 20% equity loan, the option to cash in your Help to Buy Isa bonus and the attraction of a shiny new home, it’s easy to see why 135,000 people have used the scheme to get on to the property ladder.

Before rushing into using Help to Buy though, it’s important to weigh up your options, as there have been arguments that the scheme inflates the cost of housing.

Indeed, the median price paid by first-time buyers using Help to Buy in the second quarter of 2017 was £245,000 – well in excess of the national average for existing properties.

Lifetime Isa rule change make new savings product more flexible

An alternative to a Help to Buy Isa is a lifetime Isa. The principle is the same – for every £4 you save, the government will add a £1 bonus.

This can either be used to buy your first home, or withdrawn tax free when you’re aged 60 or above. Withdraw money at any other age for any other reason, you face a 25% penalty.

The lifetime Isa launched this year, but the bonus was only paid after 12 months of saving. From April 2018, however, the bonus will be paid monthly, giving savers much more flexibility in how and when they can use it.

In our step-by-step guide, you can find out how to double your Help to Buy bonus by switching it to a lifetime Isa by the beginning of April 2018.

Property prices and yields will slow

With a swathe of reforms making property investment less attractive and years of price rises resulting in some areas hitting their ceiling prices, it’s likely that any growth in property prices during 2018 will be fairly slow.

On paper, this might sound like good news for first-time buyers struggling to afford a property, but be careful – you’ll also be buying at the top of the market, and without upward pressure on prices, there could even be the danger of going into negative equity.

  • Whether you’re saving for your deposit or are ready to apply for a mortgage, our comprehensive guides for first-time buyers can help you on your way.
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