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Having a mortgage is getting cheaper, as renters lose out
If getting onto the property ladder is one of your goals for 2016, there’s now another reason why you might want to buy a home – it’s been getting cheaper. New figures from the Office for National Statistics (ONS) show that the cost of having a mortgage has fallen slightly since the financial crisis in 2008. It’s less good news for tenants though – renting has got substantially more expensive.
The cost of renting has increased by 36% over the last seven years, while mortgage payments have fallen slightly and are now 3.2% cheaper. This could mean that some people will be stuck renting for even longer, as rising costs could make it harder for them to afford to save up for a deposit.
Benefits for buyers?
The Bank of England’s base interest rate has now been at 0.5% for 81 months, which means that mortgage costs have continued to stay low as well. Homeowners now spend an average of £143.80 a week on their mortgage, down from the 2008 figure of £148.50. This isn’t the same all across the country though – mortgages for Londoners have actually got more expensive since 2008. For those owning a home in the capital, mortgages cost an average of £207.80 a week.
Over the same period, renting has got considerably more expensive. However, it’s still much cheaper to rent than it is to own a house, with the average weekly rent now at £90.20. This is up from an average weekly rent of £66.30 back in 2008. This could mean that if the cost of renting continues to increase over the next few years, tenants could find it even harder to save for a deposit on a mortgage.
Getting on the housing ladder
If you’re struggling to take that first step onto the property ladder because you just can’t afford the deposit, there is help available from the Government. Help to Buy schemes mean that you could get a home with just a 5% deposit, so those who can’t save up as much don’t need to be locked out of homeownership.
For those buying a new build property, the Help to Buy Equity Loan can provide up to 20% of the cost of the new home, and there’s no interest payable on this for the first five years. You could also benefit from the Help to Buy Mortgage Guarantee, regardless of the age of the property you’re buying. This means that lenders are able to purchase a guarantee on mortgages, so they could be more likely to lend to you.
The Government has also recently launched Help to Buy ISAs, a tax-free way of saving up to buy a home. You can save a maximum of £200 a month in the Help to Buy ISAs, and the Government will top this up by £50. This could help you save up for a deposit faster, with a maximum boost from the Government of £3,000 available.