Is There Good News for First Time Home Buyers this Year?

Rents are rising, and they show no sign of stopping. Last year, one Manchester borough recorded an average annual price growth of 11.9 per cent, while rents in some London boroughs increased by almost 6 per cent. Meanwhile, forecasts indicate that average UK rents could see a rise of 4 per cent before the end of the year.

Little wonder, then, that some tenants are keen to swap their rental payments for a mortgage. So how should we rate the prospects for first time buyers (FTBs) in the year ahead? What are the Bank of England’s plans for interest rates, and will the Labour government offer more help to first time home buyers?

These are questions Orlando Reid’s estate agents in London and Manchester are often asked by clients buying a house for the first time. Our agents are acutely aware of the challenges buyers face when taking that important first step. That’s why they are always ready to offer help and guidance, including advice on accessing first time buyer schemes.

Here are a few of the key takeaways for buyers hoping to take that first step on the property ladder.

What’s Happening with Mortgage Rates?

The Bank of England (BOH) is responsible for setting the bank rate (or ‘base rate’), which affects the cost of your mortgage. This rate is used to control inflation, which hit a high of 11.2 per cent in 2022.

Since that time inflation has fallen significantly, and the bank rate has dropped from a peak of 5.25 percent in 2023 to the current level of 4.5 percent. Mortgage lenders have consequently been able to offer cheaper deals to home buyers.

Since the beginning of 2024, we’ve seen three rate cuts, and experts predict we’ll see the bank rate drop down to 4 per cent by the end of the year.

Is Government Help Available for First Time Buyers?

Government help will be essential for many FTBs with dreams of owning their own home. Most initiatives stipulate that the home you buy should be the only residence you own, with eligibility based on income and other factors.

The Help to Buy mortgage guarantee scheme was originally intended to wind up in 2022 but has now been extended until the end of June 2025. This initiative supports lenders who offer buyers 95 per cent mortgages, but not all lenders participate, so it’s advisable to check with your mortgage broker. The scheme is available for all properties (old or new) costing £600,000 or less.

Shared Ownership is a part buy/part rent scheme for first-time buyers as well as previous homeowners who find it hard to get back on the property ladder. The scheme lets you buy a 10-25 per cent stake in a property built under the Affordable Homes Programme. Part-owners pay rent at a price based on the value of the share they do not own. However, they can gradually increase their ownership by purchasing more stakes in the property until they own it outright.

The First Time Buyers’ Initiative (FTBI) helps first-timers purchase a property that could be 30 to 50 per cent below market value. To qualify, you must purchase a home on a site specifically developed under FTBI rules (your eligibility may be subject to local authority criteria). You will be required to take out a first mortgage with a qualifying lender. Your mortgage and deposit must be at least 50 per cent of the purchase price, with the government making up the remainder. When your home is sold, the discount is passed on to the next eligible buyer.

A Lifetime ISA (or LISA) is a savings account that makes it easier for first time buyers to save for their first home. The Building Societies Association says the average deposit paid by an FTB in London is £144,500 (based on a property costing £425,000). The LISA enables buyers to save up to £4,000 per year, and the government undertakes to top this up with a 25 per cent bonus.

How Should I Prepare for My First Property Purchase?

In our experience, the most successful FTBs are those who have carefully planned and prepared for homeownership.

• Take steps to build a deposit
• Pay off any debts to clear your credit score
• Talk to a mortgage broker who can advise you on the best deals
• Get pre-approval for a mortgage

Finally, seek help from a trusted estate agent who can guide you to suitable properties within your budget range. At Orlando Reid, our locally-based professionals have a deep-rooted understanding of the property market and can advise you on all aspects of your purchase. 

Call us now to share your home-moving plans.