Buying your first home can seem at times like climbing a particularly steep hill - daunting, confusing and with several pitfalls along the way. Prices are still rising, with the average UK first-time buyer home now costing £184,973, 7% up on that of a year ago1.
And finding the money for a deposit without help from the Bank Of Mum And Dad can be a real challenge – the typical first-time buyer deposit is now £33,222- that’s 133% of an average salary1. The average first-time buyer borrowed 3.49 times their income, and the average first-time buyer loan was an estimated £136,0001.
But with a few simple steps to prepare yourself financially, and make lenders see you in a positive light, you could approach buying your first home with a lot more confidence.
Share a credit account? Then you share credit report information too. Sharing finances can mean you’re more linked than you think, as lenders will often look at both of your credit reports when assessing your credit.
If and when you apply for credit together, lenders will be able to see your partner’s financial information too and may use this when they make a decision about you when you next apply for credit. So we’ve put some tips to help you get up to speed with shared finances and credit.
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Financial association means thatyour credit reportcan become linked to someone else’s through joint financial activity. This could be applying for a mortgage, opening a joint credit account, or in some cases even being on the same broadband or utility contract.
Your credit report will only contain your financial information, but will show the name of anyone you share a financial connection with. If you share a credit application, each of you would see the other’s name in the section of your Experian Credit Report entitled ‘Financial Associations’.
Britain has enjoyed a number of property booms over the past 20 years. And despite the fact that property prices have also tumbled on a number of occasions, the average house price has risen significantly.
According to the Nationwide House Price Index, the average UK house price went up from £54,008 at the end of Q3 1996 to £206,346 at the end of Q3 2016 – a whopping 282 per cent increase.
Unfortunately, rising house prices has meant that it has become harder for first-time buyers to get a foot onto the property ladder. Using the average house price as a guide, even if a mortgage has a 95 per cent loan-to-value, buyers would still need to find a deposit of over £10,000. Add in solicitor and estate agent fees and the initial layout can seem daunting.
After the political whirlwind of the last couple of months, it appears the country’s immediate future may be becoming a little clearer.
Now that Theresa May has taken office as Prime Minister, she will agree the government’s negotiating position before she triggers Article 50, and officially starts the clock on the UK’s exit from the EU.
According to the Nationwide House Price Index, the average UK property price in October 2015 was £196,807 – up from £173,678 in October 2013 (a rise of 13.3 per cent). On a mortgage that offers 90 per cent loan-to-value (LTV), this means finding a deposit of nearly £20,000, with estate agent and legal fees on top of that too.
Yesterday, one month later than most experts had predicted, the Bank of England announced a historic change in interest rates, the first change since 2009 – and rather than the upward rise that had been widely predicted for the past few years, it fell from 0.5% to 0.25%.
So what does this mean in practical terms?
Mortgages – For those on a tracker mortgage, as long as your lender passes on the cut to its own base mortgage rate (or if it is linked directly to the BoE base rate), your rate (and monthly payment) should go down. In all, there are about 1.5 million trackers in the UK.
However, some banks and building societies have a ‘tracker floor’, which means there is a limit to how low the percentage can go above the Bank of England base rate. In this case, your rate (and mortgage payment) would be unlikely to change. If you have a fixed rate mortgage, you wouldn’t be affected if the rates went down during your fixed period, but when the time comes to re-mortgage – or if you’re a new homebuyer – , the options open to you could potentially be more favourable, with some experts suggesting long-term fixes even going below 2%.
For pension savers who are using an annuity, a rate cut could make annuity rates fall by putting pressure on the long-term. This could have a potential negative effect on employee pension schemes too.
Needing currency for holidays – While interest rate cuts can oftenmean a weakening of the pound, it may well be the case that the currency markets will have been factoring in a cut for some time already – hence there may be little change if it does eventually happen. Interest rate cuts can be done sometimes to provide an economic stimulus – to encourage people to spend rather than to save – so perhaps this could help improve consumer confidence and boost the pound.
Many homeowners, particularly those who’ve joined the market in the past seven years, will have never been faced with an interest rate rise, and tighter borrowing conditions in the future could make it harder to cope with a rise.
How your credit score could help – Having a higher credit score could mean you get better deals or lower interest rates on credit, loans and mortgages. The Experian Credit Score is a guide to help you understand your Experian Credit Report, and how the way you’ve managed the credit you’ve had in the past might affect applications you’re making now.
It can also help you to monitor your progress as you get your finances in order before you apply. Getting your credit score up could open up the potential chance to get better rates.
(original post 14 July 2016, updated 5 August 2016)
Many homeowners may find that once that their deal comes to an end, their interest rate and mortgage payments may well go up. This could be a good time to check out whether you can re-mortgage and get a lower rate elsewhere.
In this case you are generally going to be taking out a mortgage which is the same size as the one you already had. Your monthly payments may be higher or lower than you currently pay, depending on the mortgage you go for. Alternatively, you may just want the stability of a fixed rate, if you’ve been on a variable rate that you think may fluctuate.
It can take a few months to process a mortgage application, so it’s best not to wait until your current deal ends before you start looking around. Watch our new #AskExperian video to find out what some of the options are.
These tend to be couples and singles aged 65-plus, who have chosen to move to green and pleasant market towns for their retirement . Places with a thriving community of all ages, small enough to have a ‘villagey’ feel but large enough to have all the regular amenities and social needs that they would be used to.
“Old age and retirement used to be a more homogenous group,” explained Richard Jenkings from Experian.
“In the past people would go on holiday to the seaside and then a lucky few would then retire to those same resorts. Today we still see this happening, but a rising trend is for better-off retirees to move not to the traditional sea-side resorts, but instead to pleasant, often historic, cathedral cities and quality market towns. Continue reading →