Is it too late now to say "Happy New Year"?
We're a few weeks into 2022 and you're likely making plans for how to seize the very best of the upcoming months.
Perhaps you've decided that this is the year you purchase your first home?
Or maybe, following the last couple of years, you've planned to protect your family and your finances with insurance?
Or it could be that this year, you take that holiday, book that wedding or look more purposefully at investment opportunities.
No matter what your 2022 dream is, or what your plans are, we're here to give you all the help you need.
It’s not too late to be considering New Year’s resolutions for 2022. Maybe you’re looking to give up junk food, or instill a new workout regime? But if you’re looking toward home ownership this year, check out these four things to consider when prepping to buy your first home.
Have you saved a big enough deposit?
Generating a deposit is one of the biggest barriers to home ownership, especially given the significant rise in house prices last year. How much you’ll need depends on the value of the house. Some deposits can be as low as 5%, but typically are closer on average to the 10% mark. The average first time property purchase of 2021 (in England) was £239,659, meaning the 10% deposit amount is £23,966 and the 5% comes in at around £11,983.* You could be closer to your deposit than you think especially if you find a property below the average value.
How much might you be able to borrow?
How much you can borrow is determined by your income combined with your outgoings and financial obligations. Generally, banks will allow you to borrow 4.5 times your income, so your affordability is obviously significantly more if you are buying with another person compared to taking it on alone. Lending criteria varies by lender, so it’s best to seek financial advice from a broker who can carry out research into the product best fitted to your needs.
Rates on the rise; should you worry?
While rates are definitely rising, given that the Bank of England have recently lifted their base rate and inflation is on the rise, the overall rates are still lower than they have been across the last decade. Again, we recommend speaking to a broker for advice, as they can search across the whole of the market’s rates to find what suits your needs closest.
Budget for the additional costs of borrowing.
Buying a home doesn’t consist of just meeting the needs of your mortgage by raising a deposit, you’ll also need to ensure you have funds to cover legal costs, house surveys and moving costs. Research by Reallymoving predicted that first-time buyers spend an average of £2,082 in additional costs, consisting of £1,260 in legal fees, £450 on house surveys and £372 on removals.*
If you think you're ready to buy your first home, get in touch today
Think carefully before securing other debts against your home. Your home or property may be repossessed if you do not keep up repayments on your mortgage.
As of December, according to PharmaTimes, the total number of people waiting for non-urgent treatment on the NHS in England has reached 5.98 million.
This is a story we’re not unfamiliar with, and with staff shortages the new NHS trend for 2022, many may be looking towards securing Private Medical care, often secured affordably via Private Medical Insurance.
Download our handy guide to the benefits of PMI to learn more about the fast-growing medical care option.
Download our Guide to Benefits of Private Medical Insurance
Over 55s could be sat on more equity in their homes than they realise, especially given the house price growth seen in 2021. The two main products available to those heading into their retirement years are Lifetime Mortgages (more commonly known as Equity Release) and Retirement mortgages.
With the equity release lifetime mortgage, people don't have to make monthly payments unless they choose to.
The mortgage is usually repaid when the last borrower moves into long-term care or dies, and the property is sold. Any leftover money is passed down in the borrower's will.
With the two retirement mortgage types available, borrowers can take out a deal where they only pay the interest on the loan - or a mortgage where they pay back both the interest and chunks of the original loan.
With the interest-only deal, because the borrower is only paying off the interest, this means the capital - or the original amount borrowed - will be repaid when the last borrower moves into long-term care or dies.
With the retirement capital and interest mortgage, the mortgage will be fully paid off when the mortgage term ends.
TOP TIP: Before looking to borrow money, we encourage you to speak firstly to family. Involving them in the process is a really good way to keep the process clear and open for everyone involved. Furthermore, obtaining advice from a qualified professional is essential to the process.
What can you use later life borrowing for?
The pandemic has impacted many of our finances and with significant rises in living costs on the imminent horizon, many will be looking at where they can access additional funds. Funds can be released to repay an outstanding mortgage, repay debts, or even to pay for at-home care.
Equity Release Myth Busting:
There are still some myths surrounding later life borrowing more specifically around Equity Release. Read more about the common misconceptions here.
This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration. Check that this mortgage will meet your needs if you want to move or sell your home or you want your family to inherit it. If you are in any doubt, seek independent advice.
There’s always a myriad of news articles on the TV, in the papers and online, so its hard to pick out which will directly affect us. Here we’ve collated a few that may hit your pockets this year and a few tips on how you could prepare for these costs.
The return of European Roaming Charges
Another result of the Brexit negotiations is that many mobile companies will return to charging for roaming while visiting other countries. Vodafone, EE & Three have all confirmed their return to the charges so it’s something else to feature in when making your travel plans this year.
What can you do about it?
If roaming charges are a priority for you when considering the uses of your tech, consider awaiting a contract renewal or upgrade a little longer as the costs don’t kick in until you get a new contract. Similarly, shopping around with the providers who still haven’t reinstated the roaming charges could be wise, or even consider getting a special roaming sim if you have an unlocked phone.
Changes to Insurance costs may cause a price hike
The Financial Conduct Authority have recently instilled a new rule for those companies’ providing insurances, including motor, home and even protection insurance. The new rule disallows these companies from rising prices when a person’s policy auto renews, otherwise known as price walking. Which should be good news in theory, but many providers are now reabsorbing those losses by rising their prices in general..
What can you do about it?
Never auto-renew. Shopping around and rebroking is still a wise choice as you’ll often find more suitable deals. Switching 23 days before renewal is the sweet spot for car insurance (21 days for home insurance). Delay, and prices can almost double as insurers' algorithms show later quote-getters are a higher risk.
Going via an insurance broker who can scour the market and find the policy best fitted to your needs is a wise choice too.
Rates are rising
In December 2021, the Bank of England increased base rate to 0.25% from 0.1% - the first rise in over three years, with more increases expected. This is good news for savers but bad news for borrowers, and if the rates continue to rise next year the cost of borrowing will only spike further.
What can I do about it?
In December 2021, the Bank of England increased base rate to 0.25% from 0.1% - the first rise in over three years, with more increases expected. This is good news for savers but bad news for borrowers, and if the rates continue to rise next year the cost of borrowing will only spike further.
If you're a mortgage holder you have a few options:
Fixes are fixed – but if yours is coming to an end soon you can 'reserve' a new deal up to six months ahead. As the name suggests, rates WON'T change during the fixed period. But it's worth searching early for a new deal just in case the base rate continues to increase this year
Lenders MAY raise standard variable rates (SVR). You'll usually be on an SVR after your fix or tracker ends.
On a tracker mortgage? Rates will increase. As the name suggests, these 'track' the base rate, so mortgage costs will go up, so check now to see if you can switch to a better deal.
If you need to discuss how these changes may impact you and how to combat them, pick up the phone for a conversation today.
www.home-finance.co.uk
0330 912 1808
enquiries@home-finance.co.uk
