Most first-time buyers would argue that it is extremely difficult to get on to the housing ladder at the present time. There is a fundamental lack of supply given current levels of demand and, combined with a historically low interest rate, this is pushing property prices to sky-high levels.
However, getting a deposit together for your first home is actually a lot easier than you think, and the current generation of first-time buyers may not realise just how favourable their situation is at the present time. Heres why.
Saving for your first home has never been easy, but the present government took a big step to making it a lot more straightforward recently when it introduced the Help-To-Buy ISA. It allows you to deposit an initial 1000, which the government will top up to 1200, and then pay in up to 200 per month thereafter, which the government will top up to 250 per month. All in all, it means that the government will essentially give first-time buyers up to 3,000 towards their deposit, with interest also being earned on the amount saved until the holder of the ISA decides to buy their first property.
Clearly, 3,000 is unlikely to be enough for a deposit on its own, but it is essentially free money that could make a huge difference to people that are saving for their first home.
The Wider Economy
Of course, rising house prices are a symptom of the success of the UK economy. Certainly, their rise is unfavourable for first-time buyers, but at the same time increased prosperity is causing improved job prospects and a faster increase in wages. In fact, the unemployment rate has tumbled in recent years, which bodes well for younger people seeking to own their first home. And, with inflation being zero in February and March, people are seeing their wages rise at a faster pace than inflation, which is providing them with greater spending power and also a real-terms return on their savings and investments.
However, the main reason why saving for a house deposit has never been easier is that the UK is enjoying a relatively stable period at the moment. For example, the economy is buoyant and is facing no major shocks, London remains the financial capital of the world and is able to attract significant amounts of capital, interest rates are on a relatively predictable path over the next few years, and the UK is currently not facing any major political threats abroad.
Even though the General Election could bring a degree of uncertainty in the short run, compared to the problems faced during the credit crunch and in previous decades, where various wars and economic instability became the norm, now seems to be a rather good time to be saving up for your first home.
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