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A Millennials’ Guide To Getting On The Property Ladder In 2020

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Dreaming of your own space? Here are the 6 steps to take if you're broke but want to own a house one day.

It’s no surprise that Millennials have been hit the hardest by the housing crisis. While our parents’ generation were scaling the housing ladder by their mid- to late twenties, young people today are faced with staggering rent prices, rocketing unemployment and a slump in wage growth, pushing the idyllic dream of white picket fence home ownership - or at the very least, a one-bed with a galley kitchen - further away. In fact, research conducted by Santander Bank in 2019 revealed that just 1 in 4 young people under the age of 34 will be in a position to buy a home by 2026.

As disheartening as the state of the house market is, the dream of home ownership doesn’t have to be just that: a dream! In fact, with small, pragmatic actions you can start laying the groundwork now. For those who are determined to buy, we at Octer have rounded up our top tips to bringing that first rung on the property ladder just a little closer. Just think of them as investing in your future...

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1. Think location

As any fan of property TV shows knows, house hunting really is about location, location, location. You may have fallen in love with a particular area or even property, but you also need to ask yourself: is it realistic? Chances are, if you’re daydreaming about a large country farmhouse or penthouse apartment in London Zone 1, it’s not.

Once you have an idea of your budget, it’s time to really think about how much you need to save for your deposit. This decision will depend on where you can afford to move to and where is practical for you to move to (taking commuting time to work, proximity to loved ones and any other important location factors that you need to prioritise into account). Are you willing to switch careers to move to a cheaper area? What about working remotely from home? If you already live near your family or friends, how important is it to stay close?

It’s important to note that house prices in the southeast are vastly different to those north of the M25. In fact, Oxford Economics predicts the average London house price will reach a staggering £1 million by 2030. As such, if you’re based in London, it’s important to really think seriously about whether looking outside of the capital or to the north will get you the best deal for your budget.

Property sites like Rightmove and Zoopla show average prices in different cities, as well as how much they have grown over time. 

The 10 most affordable cities for first-time buyers are:

According to Zoopla

Hull, Middlesbrough, Liverpool, Nottingham, Coventry, Manchester, Swansea, Stoke On Trent, Doncaster and Preston.

Discover more about the UK's cheapest cities here
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2. Get your finances in order

Before you even really start looking at properties, it’s time to really get your finances in order. To start, you need to get a really good grasp on your spending. You can either track your spending manually with your own excel spreadsheet or electronically with an budgeting app like Cleo, Chip, Plum and Digit which automatically connect to your bank, work out how much you can save and put it in a saving account for you, or a bank like Monzo that prioritises managing your money. Doing this will help you realistically understand how much you can save and where those savings can be made - the lifestyle changes you can adopt long term. Perhaps giving up your daily Starbucks isn’t going to work out - and we are far from telling you to give up avocado on toast - but differentiating which spending habits non-negotiable and where you might be prepared to be more flexible is an important step in the saving process. 

For more budgeting and saving tips, check out our pieces on how to save money in the New Year and good money habits to make everyday.

10 good money habits you should be following now
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3. Take your savings seriously

If you’re ever really going to save a substantial amount, you need to take the money trickling into your savings account seriously. That means not dipping into it here and there for ASOS sales, holiday spending or rainy day funds. Put simply, the best way to start saving is to work out your cost of living then begin to limit your spending each month strictly to that amount - gradually though, this can mean huge lifestyle changes and doesn’t have to be an instant shift. What’s left over can be saved. Set up a direct debit for the day after payday so these savings aren’t accidentally eaten into. 

See here for more brilliant saving advice
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The four best saving accounts for first-time buyers

The Lifetime ISA

The Lifetime ISA allows you save up to £4,000 a year towards your first home or retirement (after you hit 60) and the state adds a 25% bonus on top of what you’ve already saved annually, meaning you could get up to £1,000 bonus. Plus, you earn interest on whatever you save and, because it's an ISA, that interest is tax-free. You must be 18 or over but under 40 to open one.

Find out more

Nationwide FlexDirect

Ranked the best bank account for savers short term by Money Saving Expert, Nationwide’s FlexDirect offers an interest rate of 5% AER fixed for a year on up to £2,500 as long as you haven't had a FlexDirect account before and pay in £1,000 per month. This rate drops to 1% after a year, so best to look elsewhere then for any competition. 

Discover Nationwide's FlexDirect

HSBC Regular Saver

If you've already got an HSBC current account, HSBC’s regular saver pays 2.75% AER fixed for a year if you save between £25 and £250 each month. Those who have newly switched into HSBC's Advance current account can also get a £175 bonus, though there is a £1,750 month minimum pay-in.

Apply for HSBC's Regular Saver

First Direct Regular Saver

You need to open a First Direct current account first, but once you do First Direct's regular saver pays 2.75% AER (annual equivalent rate) fixed for one year. You'll need to deposit between £25 and £300 each month. Currently, newbies can get £100 for switching.

Explore First Direct's Regular SaverClick here for more info on savings accounts
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4. Start taking control of your credit score

To prepare for a mortgage, it’s key to start thinking about your credit score. Mortgage lenders will look at your credit score to determine how trustworthy you are and, in basic terms, how likely you are to pay them back. The sooner in the house hunting process that you check your credit score, the more time you have to make a plan to manage and improve it. There are certain that have a negative impact on your score. For example, not being on the electoral roll (which proves where you live) or having a missed or late payment. Demonstrate that you are reliable in advance by building up your credit history, namely with a credit card, closing down any unused credit cards, paying off any outstanding debts and getting on the electoral roll.

For information more on credit cards, click here
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5. Consider a Help To Buy scheme

While the Help to Buy ISA is now closed to new accounts (since November 2019), there are other government-backed products to consider such as the Help to Buy: Equity Loan where the government lends you up to 20% of the cost of a new-build home (in England or Wales), so you’ll only need a 5% cash deposit and a 75% mortgage to make up the rest. You won’t be charged loan fees on the 20% loan for the first five years of owning your home. This system makes home ownership far more affordable for those who may struggle with monthly repayments. The scheme remains open until the end of 2021.

More info on the Help To Buy: Equity Loan here
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6. Explore Shared Ownership

Shared Ownership schemes offer first-time buyers the chance to buy with a much smaller deposit than is usually required by offering the chance to buy a share of your home (between 25% and 75% of the home’s value) and pay rent to the housing association on the remaining share. Shared Ownership is also open to households that earn £80,000 a year or less outside London, or your household earns £90,000 a year or less in London. Check with your local housing association to see what Shared Ownership schemes might be available to you.

Find out more about Shared Ownership here