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Rising Rental Costs and Affordable Homeownership Options

Posted on 20th February 2024 by Master Removers

Rising costs are a constant lately, and this is something tenants know all too well. However, with the latest round of rent increases, some will undoubtedly consider getting onto the property ladder. But the odds for would-be first-time homeowners aren’t great either, with mortgage rates increasing and an already challenging process of saving for a deposit to navigate.

However, amidst this uncertainty, the prospect of affordable homeownership becomes worth a second look. This blog considers these practical solutions to achieve the dream of owning a home without sacrificing financial stability. From exploring government-backed initiatives to considering renovation opportunities and enlisting the assistance of professionals such as Master Removers Group, we endeavour to guide you toward accessible pathways to homeownership.

Contents

  • Rising Rental Costs: Potential to Avoid Terminal Tenancy
  • The Pros and Cons of Becoming a Homeowner
  • Housing Schemes: Accessible Pathways to Homeownership
  • Fixer-Up and Renovation: Affordable Ownership Alternatives
  • Embracing Smaller Homes and Smart Storage Solutions
  • Master Removers: Excellence is the Bare Minimum

Rising Rental Costs: Potential to Avoid Terminal Tenancy

In the housing realm, there’s no sidestepping the blunt truth – rental costs are spiralling upward, leaving many individuals grappling with the daunting task of securing a stable abode. This isn’t just idle speculation:

  • Rental costs across the UK are charting a relentless upward trajectory, posing a formidable challenge for tenants navigating through inflated rents and a dwindling pool of available rental properties.
  • London stands out as a glaring example, witnessing a notable surge in rents by 6.9% in the twelve months leading up to November, echoing a broader nationwide trend of escalating rental prices.
  • Nationwide, rental prices are scaling unprecedented heights, with experts foreseeing a six percent surge for 2024, albeit slightly tempered compared to the previous year’s staggering 9.5% escalation.
  • This surge doesn’t occur in a vacuum; rather, it’s intertwined with broader market dynamics, encompassing potential fluctuations in housing prices and various economic factors.
  • Statistical data reveals a palpable uptick in private rental prices across the UK, registering a solid 6.2% increase in the twelve months leading to January 2024, maintaining its course for the second consecutive month.
  • On a regional level, England witnessed a commendable 6.1% surge. In comparison, Wales and Scotland exhibited robust increases of 7.0% and 6.8% during the same timeframe.
  • London emerges as the frontrunner in England, boasting a noteworthy 6.9% rise in private rental prices. In contrast, the North East shows a more modest 4.7% increase.

These escalating expenses thrust individuals into a problem, from making tough decisions about cutting back on essentials to grappling with the challenge of covering rent. The writing on the wall is clear: the imperative to explore viable pathways towards affordable homeownership has never been more urgent for those seeking to break free from the cycle of perpetual tenancy.

The Pros and Cons of Becoming a Homeowner

It may appear contradictory, but you must know every angle before deciding between tenancy or homeownership. To provide a balanced understanding, we’ll discuss the potential downside to the current UK housing market.

Soaring rental rates also saw a steep increase in mortgage rates, aligning with the 6.7% inflation rate prevailing in the UK. Additionally, the average rate on two-year fixed-rate mortgages surged to 5.08% by February 2024, compared to 4.99% at the start of the year.

Unfortunately, the simple explanation is the increase in mortgage rates mirrors the huge rental hikes. There was hope that declining property prices could help balance this. However, the data tells a different story, with a rise of 3% in 2024, marking the first increase in over a year.

So, it’s a grimmer outlook for homeownership, but this all depends on how far you’re willing to look. There are several factors to consider – mortgage repayment rates and deposits are increasing. House prices are also veering into an upward trend, which makes affordability even trickier.

However – the fundamental difference is the ownership part – you’re paying towards an asset you own. As we’ll detail in this blog, there are a few options to consider when considering buying a house or apartment.

Housing Schemes: Accessible Pathways to Homeownership

In pursuing affordable homeownership, the UK government has rolled out housing schemes tailored to assist first-time buyers and existing homeowners. These initiatives aim to tackle individuals’ challenges when venturing into the property market.

Mortgage Guarantee Scheme

Crafted to streamline home purchases with a mere 5% deposit, this scheme acts as a lifeline for lenders offering such mortgages. Its primary goal is to encourage lenders to extend 95% Loan-to-Value (LTV) deals, providing vital support to buyers with modest deposits.

First Home Scheme

This scheme presents an enticing opportunity for those eligible to snag newly built homes at a discounted rate, often slashing prices by 30-50% off the market value. Eligibility hinges on factors like age, first-time buyer status, and adhering to specified income thresholds.

Right To Buy Scheme

Council tenants can acquire their rented property at a reduced price, with annual discounts determined based on various considerations. To qualify, tenants must make the council property their primary abode and meet specific secure tenant criteria. You can read more about our research into this scheme here.

Shared Ownership Scheme

Offering a more accessible path to homeownership, this scheme enables buyers to purchase a fraction of a property, lowering the initial deposit burden. Rent is paid on the share not owned, often at a discounted rate, making homeownership a tangible reality for many.

Help to Build

Exclusive to England, this initiative empowers aspiring homeowners to construct their dream abode by providing an equity loan for land acquisition. The loan amount, ranging from 5% to 20% (or up to 40% in London) of the estimated building cost, is a crucial stepping stone towards realising homeownership dreams.

These schemes represent pivotal avenues toward affordable homeownership, empowering individuals to take confident strides into the property market. However, navigating eligibility criteria and ownership stipulations requires thorough research. Consulting with a mortgage broker or your bank’s home loan department is highly recommended to leverage these opportunities effectively.

Fixer-Up and Renovation: Affordable Ownership Alternatives

Fixer-upper and renovation properties provide affordable homeownership opportunities in the UK. These homes, requiring refurbishment, typically come at a lower price point than fully renovated properties. On average, fixer-uppers are listed at £336,979. 

At the same time, fully renovated homes command £366,281, making them a more accessible option, particularly for first-time buyers and those seeking to personalise their living spaces.

Government schemes like the Mortgage Guarantee and First Home Scheme aim to support aspiring homeowners. These initiatives have the potential to enhance the affordability of fixer-upper properties further, offering additional avenues for prospective buyers to explore. However, prospective buyers must carefully assess the costs and efforts associated with renovations.

Considering potential unforeseen expenses and delays is crucial before committing to a fixer-upper property. Renovating such properties requires a well-thought-out budget, often involving a mortgage or home loan, which presents its own set of challenges compared to traditional property purchases. Moreover, risks exist due to the dilapidated state of the building, requiring expenditure on survey costs and other unforeseen expenses.

Many individuals partnering with Master Removers work with our members’ services to mitigate renovation costs. Removal and storage services can streamline renovation, offering practical solutions to logistical challenges. For further insights into this approach, you can explore resources provided by one of our members here

Embracing Smaller Homes and Smart Storage Solutions

Embracing smaller homes and smart storage solutions can pave the way for affordable homeownership in the UK. Opting for a smaller property and leveraging self storage facilities presents a strategic advantage. These storage facilities offer a practical and feasible investment opportunity, providing a flexible and cost-effective solution for storing surplus belongings.

By purchasing a smaller property and utilising self storage for items that do not fit within the living space, individuals can effectively reduce the expenses associated with owning a larger home. Moreover, government schemes could enhance the affordability of smaller properties, offering additional support to prospective buyers.

However, carefully assessing the expenses and efforts linked with self storage is imperative. Considering the possibility of unexpected costs and delays is crucial before committing to this approach. While smaller homes may offer financial benefits, there is a compromise involved, balancing comfort and functionality in compact living spaces. Some individuals may find adjusting challenging, particularly if downsizing from a larger property.

Despite not aligning with everyone’s idea of homeownership, the option to explore smaller homes and innovative storage solutions remains open. For those interested in learning more about the benefits of storage solutions, additional resources are available for further exploration. You can also contact us anytime to discuss tailored packages and solutions.

Master Removers: Excellence is the Bare Minimum

The Master Removers Group is an elite removal, storage, and distribution company network. Booking with one of our members guarantees the best customer care and service delivery standards. This collective of partners spans throughout the UK, with removal depots and storage warehouses in strategic positions, ideal for long-distance removal jobs to anywhere in Britain and Europe and beyond.

Each member brings additional services and expertise so we can coordinate specialist packages. At the end of the day, we’re also in the same boat – we have been tenants and first-time buyers. The prospect for people nowadays is daunting, but there are options to consider, and we hope this blog can shine a light on these alternative routes to homeownership.

And when the time comes to move, you can trust us to be with you every step of the way. Click here to begin an assessment from the nearest Master Remover Group provider.