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28 Dec 2021

Buying your first home in 2022: five things to consider

From mortgages to house prices, the key things first-time buyers need to know

Buying your first home is a major milestone, but it can also be a stressful and time-consuming process.

We can't speed up legal checks or deal with estate agents for you, but we can help you get your head around the key considerations of buying a home, and help you decide whether now is the right time to make the move.

Here, we explain five things that all prospective first-time buyers should consider before buying a home in 2022.

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1. Have you saved a big enough deposit?

Saving a deposit is one of the biggest barriers facing first-time buyers, and rising house prices in 2021 haven't helped the situation.

The good news is that low-cost 95% mortgages are readily available once again, having disappeared almost entirely during the early stages of the pandemic.

How much deposit you'll need to buy a home depends on the cost of the property you're looking to purchase.

The table below shows how much you'd need for a 5% or 10% deposit for an average-priced first-time buyer home in England, Scotland and Wales (equivalent data is unavailable for Northern Ireland).

You can use our mortgage deposit calculator to get an idea of how long it might take you to save up enough money.

CountryAverage first-time buyer price5% deposit10% deposit
England£239,659£11,983£23,966
Scotland£144,492£7,225£14,449
Wales£168,657£8,433£16,866

Source: Land Registry, data based on prices from September 2021.

2. How much might you be able to borrow?

When you apply for a mortgage, banks will assess your financial circumstances before deciding whether to approve the loan.

Generally speaking, banks will allow you to borrow up to four-and-a-half times your annual household income (your income plus that of anyone else you're buying with).

This is just a general guide - some banks may limit you to four times income, while others may offer five or even five-and-a-half times if you meet other criteria. The Bank of England is set to consult on changing some of the tests lenders use to calculate affordability in the new year.

Mortgage criteria vary from lender to lender, so it's worth speaking to a broker to get advice on which banks might offer the best deal for your circumstances. This can be especially helpful if you're self-employed, as you may need to provide more evidence to support your application.

The table below shows how much you might be able to borrow based on different household incomes.

Combined household income4 times income4.5 times income5 times income
£40,000£160,000£180,000£200,000
£60,000£240,000£270,000£300,000
£80,000£320,000£360,000£400,000
£100,000£400,000£450,000£500,000

3. Should you be worried about mortgage rates?

Mortgage rates fell in 2021, but with inflation on the rise and the recent increase in the Bank of England base rate, we could see higher rates in 2022.

The first thing to note is that you shouldn't fret about the prospect of rates increasing, especially if you've only got a small deposit. Lenders generally increase rates on low loan-to-value deals (such as those where homeowners are borrowing just 60%) before increasing the costs of low-deposit deals, which are already significantly more expensive.

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. It's a similar tale with 90% mortgages, where rates fell to well below 2% in the second half of 2021.

4. Can you afford the additional costs of buying?

Buying a home isn't just about the purchase price. 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 (and you'll get a discount if it's between £301,000 and £500,000). In Scotland, it's £175,000, and in Wales, it's £180,000.

Research by Reallymoving predicted 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 your area?

The stamp duty holiday resulted in house prices soaring in 2021, handing a blow to cash-strapped first-time buyers.

The bad news for those looking to buy a home is that prices are unlikely to fall in 2022 - but the good news is that the rate of increase is likely to slow.

The estate agent Savills and the property portal Zoopla both predict rises of around 3-3.5%, well below the 10% increases seen in some areas in 2021.

House prices vary from area to area, so it's worth doing some research on property portals and looking in 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.

Will 2022 be a good year for first-time buyers?

It's difficult to predict what will happen next in the property market, but experts are confident that the market will remain robust in 2022, with prices rising slowly and mortgage options remaining plentiful.

It will still be a difficult time to buy your first home, but we could see some changes that will make it a little easier.

First of all, the Bank of England is rumoured to be looking at loosening rules on how lenders test affordability, which could make it easier for first-time buyers to get a mortgage.

In addition, the government's plans to grow its First Homes scheme could see more first-time buyers purchase properties at a discounted rate.

If you are thinking of buying a home in 2022, take your time, do your research and - where possible - think with your head rather than your heart. Happy house hunting!