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23rd January 2020
According to the latest House Price Index from Halifax, house prices were 4.0% higher at the end of the year than in December 2018.
But why?
Well, It appears that post-election certainty about when we’ll leave the EU has encouraged sellers to act. However, this increase shouldn’t dissuade first-time buyers. In fact, 2020 could be the perfect time to get your foot on the property ladder. As we mentioned in last month’s market trends, they’re some great mortgage deals available.
These are are our tips for getting the best one.
Improve your credit score
It’s true that there isn’t a minimum credit score needed to get a mortgage deal. But the higher the score, the greater your chances of getting a good one. This is the advice according to Experian’s Credit Score system:
Excellent (961-999): you’re in line for the best deals and lower interest rates
Good (881 - 960): you can get most but not all of the best deals
Fair (721 - 880): it’s possible to get a mortgage with reasonable interest rates
Poor (561-720): you may get a deal, but the interest rates will be higher
Very Poor (0-560): you may be declined or could find it harder to get a mortgage without higher interest rates
Can I get a mortgage with a bad credit score?
You may still get a mortgage deal with a bad score. However, it could be more expensive and you’ll need a higher deposit. Need some help? We’ve written this post that includes three simple steps to a better credit score.
Give your savings a boost
Like improving your credit score, getting a deposit together takes time. However, there are initiatives in place to help - especially if you’re a first-time buyer. If you are aged 18-39 and looking to buy a property up to £450,000, you could open a Lifetime ISA (LISA).
What is a Lifetime ISA?
Launched in April 2017, this tax-free savings or investment account was designed to help people get a foot on the property ladder - or save for retirement.
How does it work?
Firstly, you’ll only be able to deposit £4,000 each tax year. But for every £4 you deposit, the government will contribute another £1 (for that first property or your retirement). That equates to a maximum bonus of £1,000 each year; you can claim this every year until you’re 50.
However, if you are putting this towards your first property, it’s important to note:
It must be worth £450,000 or less
Any cash you withdraw will not benefit from the government bonus
If you use the money from withdrawals on anything but your first property, you’ll pay a 5% penalty
What about the Help to Buy ISA?
Unfortunately, these are no longer available to new applicants. But if you do have savings in one of these, you could continue to save and benefit from the 25% bonus until December 2030.
But when it comes to mortgages, trying to work out what to do with your finances can be overwhelming. With that in mind, this is our most important piece of advice:
Get some independent financial advice
Surprisingly, this is something that a lot of buyers skip in favour of mortgage comparison sites, e.g. GoCompare and Compare the Market. But these sites only look at offers that are available on the high street - neglecting broker-only deals. And with research from Which? revealing that four in ten mortgages are broker-only, they’re a key part of the whole picture.
Different lenders will offer you varying amounts based on your circumstances. And, confusingly, two banks could offer you two very different deals. Consequently, this can be a deciding factor in getting you to the next tier of property, e.g. if one bank is happy to lend you that little bit extra for your dream home.
At Maslen Financial Services, we offer honest and unbiased financial advice. Importantly, and unlike a lot of Mortgage Advisors, this service is completely fee-free.
Looking for more advice on buying your first property? Take a look at our checklist for first-time buyers. Don’t worry, we can help with everything from independent financial advice to reassurance throughout the buying process. Get in touch.