Buying a property at any stage in your life can be a financially challenging time.
That mixed with the growing interest rate uncertainty predicted by Zoopla, it’s understandable why Millennials are concerned about being able to get onto the property ladder.
How government schemes can help
The government Help to Buy schemes including ISAs, Shared Ownership and Equity Loans, help young people take that initial step to buying their first home. The Help to Buy ISA pays first time buyers a government bonus which helps them towards saving for that all important deposit. For example, save £200 a month and the government will add in £50 (up to a maximum of £3,000), boosting your savings.
The Lifetime ISA works slightly differently. This account allows you to save up to £4000 a year, unlike the Help to Buy where you can only save up to £200 a month. The government then contributes a bonus of 25%, so if you save the maximum amount, you’ll receive a total of £5,000 at the end of the tax year.
Back when parents of Millennials bought their first homes, there were no such schemes available. Meaning that it was just as hard to save, with most choosing to stay at home with parents instead of paying rent.
Millennials can defend themselves against increasing mortgage rates
If Millennials manage to get over the initial hurdle of saving for a deposit, they have a much better range of mortgage rates available than their parents did. Nowadays it is possible to get a two-year fixed rate mortgage at around 1.7%, returning to the average 4.2% variable rate after this time; this was unheard of when their parents secured mortgages.
Back then, fixed rate mortgages as we know today were rarely available meaning their annual repayments would both rise and fall. The 1980s property boom and subsequent collapse dumped millions of homeowners in negative equity, causing many to lose their homes.
So what is the silver lining for Millennials looking to buy?
With the baby-boomer generation starting to sell up using companies such as Andrews Online with a view of downsizing, or moving into elderly people’s accommodation, the demand for properties will begin to decrease, forcing prices to drop and bringing home ownership within reach for more people.