Could the mortgage regime benefit first-time buyers in Tendring?
First-time buyers in Tendring could particularly benefit from the government-backed 5% mortgage deposit scheme, according to an analysis.
The new mortgage guarantee scheme, revealed in Chancellor Rishi Sunak’s budget, will be available to current homeowners as well as first-time buyers looking for property worth up to £ 600,000.
But the Shelter housing charity has criticized the government’s latest attempt to help people move up the housing ladder as “pipe dreams”, with many private tenants not earning enough to pay off a large mortgage.
What will this mean for first-time buyers of Tendring?
In December, first-time buyers in the region spent an average of £ 195,690 on their property, according to figures from the land register.
A 5% down payment on a house costing that much would be £ 9,780 and increasing the mortgage by 95% would require household income of £ 51,640.
This is based on what the Shelter housing charity says is a “typical” loan-to-income ratio of 3.6 – that is, a mortgage lender will allow a household to borrow 3 , 6 times his gross income for the purchase of a house.
Data from the Office for National Statistics shows that the median gross salary of a full-time employee at Tendring was around £ 28,930 in 2020.
The median is a measure used to exclude extreme values that could skew the mean.
The 2019-2020 English Housing Survey reveals that 45% of first-time households were couples without dependent children and 31% were couples with dependent children.
Two people who live and want to buy their first home together in Tendring, with a combined median salary of £ 57,860, could therefore particularly benefit from this scheme.
Richard Donnell, research director at UK property portal Zoopla, said supporting buyers with small deposits is key to expanding home ownership.
He added: “Our analysis shows that the scheme will have the greatest benefits for buyers in low-value housing markets in the north of England and Scotland, where a 95% mortgage is more achievable.
“The program will have less impact for buyers in the south of England, where high house prices are a major obstacle to being able to afford a 95% mortgage. All of this supports the leveling of the narrative and political approach of the government. ”
The program, available from April, will provide security to lenders across the UK who offer mortgages to people with a deposit of just 5%.
Buyers will also have the option of setting their initial mortgage rate for at least five years, giving them certainty about their repayments.
It will be available for new mortgages on new or existing properties until December 31, 2022.
But Polly Neate, CEO of Shelter, criticized the government’s latest attempt to help people move up the housing ladder as “pipe dreams.”
She said: “Unfortunately, the mortgage guarantee announced by the Chancellor is a pure facade.
“Research shows this won’t help most tenants and has no hope of turning ‘Generation Rent’ into ‘Generation Buy’.
“Two-thirds of private tenants have no savings, and there’s no way they can muster the cash to pay a 5% down payment, or have the kind of income that would finance a huge mortgage. . ”
She added that the government should provide “meaningful solutions” to the housing crisis, including building more social housing that people can afford to live in.
The Treasury has been contacted for comment.