This week, it was announced that asking prices for UK house prices have fallen for the first time this year; dropping 0.3% (£1,076) to £337,371 on average, according to data from Rightmove.
While the decrease in house prices is good news for potential buyers, anyone wanting to get on the property ladder will still face significant challenges, especially if they’re first-time buyers. According to top personal finance experts at money.co.uk, while now is a great time to buy, it’s essential that you plan properly and work out which type of mortgage is right for you, before you make your move.
James Andrews, senior personal finance expert at money.co.uk said: “A fall in house prices is welcome news for anyone looking to save up for a new home. However, putting together a deposit for a property requires a lot of planning and commitment.
“The first step to building a deposit is to work out how much you need to save. This figure is based on two factors – the value of the property you intend to buy and the LTV (loan to value) of the mortgage you want to take out.
“Every mortgage comes with a maximum LTV, which is the highest percentage of the purchase price it can cover. For instance, with a mortgage with a maximum LTV of 85%, you would need a deposit of 15% or more.
“When it comes to building your deposit, remember you’re not necessarily alone in raising the funds. There are a number of Government schemes that will help you save for your deposit – from the Help to Buy scheme, the Right to Buy scheme, Lifetime ISAs, guarantor mortgages and first-time buyer mortgages.
“Before you decide on what kind of property you’re interested in, check which schemes you’re eligible for as this may limit your options. For example, if you’re using the Government’s help to buy scheme, you’ll only be able to access the loan if you’re buying a new build home or flat.
“When saving, it’s also crucial you put the money you’re saving aside into a separate account, both to keep track of how much you’re saving and also to avoid unnecessary spending.
“Finally, when searching for a mortgage deal, you need to look beyond the initial deposit and calculate how much interest you’ll end up paying. Several schemes are available that allow you to put down a lower deposit, however they often come with significantly higher rates of interest over time.
“Use a mortgage interest calculator to compare various deals, and make sure to pay attention to the small print so you’re aware of any increases in interest. Alternatively, you could look at a fixed rate mortgage deal.
“Unlike a variable rate mortgage, where your mortgage repayments could go up or down based on factors such as the economy, a fixed rate mortgage comes with an interest rate that stays the same for a set period of time.
“The main advantage of fixed rate deals is that you can guarantee your payments won’t increase, however if national mortgage rates fall below average, you could end up paying more over time.