Newspaper article The Journal (Newcastle, England)

Co-Ownership Can Put Feet on Property Ladder

Newspaper article The Journal (Newcastle, England)

Co-Ownership Can Put Feet on Property Ladder

Article excerpt

Byline: By Hilary Brown

With the North-South gap closing and the spiralling cost of properties in the region, Hilary Brown takes a look at what has happened in the housing market over the last 20 years and asks how can first-time buyers overcome the problem of high prices?

Twenty years ago on the outskirts of Newcastle, a new terraced house with two bedrooms and separate garage, close to a Metro Station, shops and schools, could be bought for under pounds 20,000.

Ideal for a first-time buyer or young family starter home, today that same house could easily cost in excess of pounds 100,000.

Mortgage interest rates were double the level they are now 20 years ago and frequently fluctuated with the rise and fall of inflation and the economy. This meant a first-time buyer could purchase a property for a reasonable price, but had to carefully consider the effect on cashflow of the fluctuating interest rates. Another important consideration at that time was whether a mortgage lender would grant them a mortgage. Being awarded a mortgage was not always a forgone conclusion 20 years ago.

Now, mortgage interest rates are comparatively low and the availability of fixed rate mortgage products offers an element of certainty to borrowers. Lenders are keen to secure mortgage business and mortgages are readily available. However, it is the advancing property prices that are now the major obstacle for those trying to get a foot on the property ladder. Prices are so high that even taking multiples of three or four times salary, the amount of mortgage required to buy that first home cannot always be achieved by first-time buyers.

* Is the only alternative to rent?

Many would-be first time buyers have continued to rent, feeling that there are no alternatives, however, with a wider range of mortgages available, there are now other solutions to securing that first property. First-time buyers need to research the market to find the best way of becoming a homeowner. An increasingly popular option is purchasing a house jointly with a friend, sibling or colleague. This way, two incomes can be considered for the purpose of calculating the amount you may borrow. What are the main points you should agree with your potential co-owner prior to entering into a joint purchase arrangement?

* You need to estimate the length of time you envisage keeping the property together.

Is the property needed for a set duration, eg while at university or carrying out a work project? If so make sure any mortgage penalty period does not exceed the duration that you wish to keep the property. …

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