How to Take That First Step

by Mark Johnston

The time is right.  This is the first thing to note.  Today, this week, this month, this quarter, is a very smart time to take that first step onto the mortgage ladder.  With interest rates at a record low and house prices falling, it is a wise time to seriously consider an affordable purchase. 

Earlier this month, the Bank of England maintained the startling base rate of 0.5 per cent.  This should come as no surprise to the readers of MortgageRates.org. 

With the struggling pound and the weak progress of the pound against other currencies, the Monetary Policy Committee has decreed that the base rate should not change.  This marks the 25^th month running that the committee has decided against a change. 

What is a surprise is that the bank decided against increased quantitive easing.  There is some disagreement in the committee, with a small division requesting an increase to the base rate, citing continued impacts on inflation and pressures within this market.

Other members of the monetary committee seem quite happy to wait and see what figures say regarding growth on Gross Domestic Produce (GDP).  Investors are betting the Bank will hold out on action until May or June but this is where the economic picture becomes a little clearer and where decisions need to be made and risks taken.

As a first time buyer, you need to consider all costs involved.  There are legal fees, stealth taxes like Stamp Duty and removal van costs.  These can mount up and sometimes lead to a cost of £10,000 seriously eating into any cash you may have accumulated for a deposit. 

Stamp duty is essentially a tax that is placed on legal documents upon transfer.  The original use for the stamp duty was when the government use to place actual stamps or impressions on legal documents to indicate that duty had been paid.

Building insurance, home content insurance, refurbishment costs, boiler repair or boiler insurance etc are all charges that you will need to consider after you have bought you first house too. 

Don’t over stretch your budget.  Take heed on this point as we have recently written about soaring debt and increases in repossessions due to faltering mortgage payments.  Think about buying a house in an area that has the space you require and make sure it’s affordable in terms of fluctuating interest rates and variable mortgage rates.

Consider all help out there.  Check with your local council to see if they take part in any of the help for first time buyer schemes.  Consider approaching your family and friends to help out with you deposit, they might consider helping you out with a small kick back. 

Save, save, save.  The bigger the deposit you have initially, the less you will pay back in interest and fees, saving you money in the long run.  Consider using a high interest saving account or putting money in a Individual Savings Account and maximising your tax free savings allowance each year.  These schemes will help you save with modest interest rates.

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