Property prices in the UK have skyrocketed over the past 20 years. It’s become much more difficult for the average Britain to afford a home, let alone for young professionals. According to the ONS, the average house is height times the average wage in the UK. This is primarily due to very low housing supply and increasing demand, the UK is not building enough homes and wages are stagnating. This means that a lot of young professionals have given up on the idea of owning a home. However, although it may seem impossible, getting on the housing ladder is totally doable! Here are some steps you can follow to increase your odds of getting your own place.
1. Change your mindset
Given the current state of the housing crisis in the UK, I totally understand why you may feel like homeownership is unachievable. According to Zoopla’s data, less than a quarter of Brits under the age of 40 own a home. However, just because something is difficult doesn’t mean that it’s completely impossible! Especially in the age of social media, it’s easy to get stuck into a rabbit hole of pessimistic content that makes you feel hopeless. The first thing you should do is to approach this goal with a more optimistic mindset.
2. Create a strict budget
The first step towards getting on the housing ladder is, as we all know, to save for a deposit. This is where things can get a bit tricky and that’s why you’ll need to create a strict budget and stick to it. This step is about understanding where your money goes and managing cash flows more effectively to slowly build the deposit. It’s become extremely easy to spend money left right and centre without even realising it. Whether it’s eating out a few times a week, heading to the pub regularly, or impulse buying fast fashion items, you’ll need to cut down on that one thing that’s making it difficult for you to save!
3. Increase your income
Let’s be honest, your ability to get on the housing ladder heavily depends on your income. Bear in mind that currently, lenders will only lend you up to 4.5 times your annual income pre-tax for a mortgage. So if you’re struggling to save for a deposit, you should consider increasing your earnings potential. For example, if you make £30,000, a mortgage lender could lend you up to £135,000 provided you have a 10% deposit. But if you make £35,000 they could lend you up to £157,500! Here are some steps you can take to increase your income.
- Take on a side hustle: Although it can be difficult to get started, a side hustle can be a good way to generate some extra income if you’re consistent. From dog sitting, proofreading, or even web/UX design for private clients, there are many innovative ways to make some extra cash and increase your borrowing potential. Remember that your income from the side hustle will need to be consistent enough for the lender to consider it in your mortgage application and this can be difficult to achieve.
- Take on a second job: Whether you work from home or have some free time on the weekends, taking on a second job is the quickest way to increase your income and borrowing potential. You could apply for a second part-time remote role or work in retail in a local shopping centre during weekends or in the evening. There are countless part-time (or even full-time if you can handle it!) opportunities for you to grow your income. However, remember that this can be extremely difficult and will require you to manage your time effectively. Overworking yourself is also the fastest way to burn yourself out.
- Invest in yourself: The single most effective way to increase your income is to invest in the best asset that you currently have: YOU! This requires time and commitment, but no one said that it would be easy. It’s never too late to take the time to learn new skills and get into an industry that has higher earning prospects. You could go back to university for a master’s, buy books, watch YouTube videos, or sign up for an online course to help you get into your desired career. Ultimately, there are countless ways to invest in yourself, it’s all about how much time you put into it.
4. Open an easy access savings account AND a LISA
If you’re finally in a position where you have enough disposable income to build a deposit, you should open an easy-access savings account. Go on moneysavingexpert.com to find the savings account with the best interest rate, this will keep changing as the rate depends on the BOE interest rate. As you are building your deposit this is a good way to make a bit of extra cash each month and reach your goals quicker. Finally, you need to make sure that you open a LISA, it’s a limited-access savings account that is specifically set up to help first-time buyers save up for a deposit. For every pound you pay into your LISA, you get £0.25 from the government. However, bear in mind that you can only pay up to £4,000 into your LISA each tax year and that the money can only be used towards a house deposit where the value of the property is less than £450,000. The good news is that you can get up to £1,000 from the government each tax year!
Understandably, saving up for a first home may seem overwhelming and sometime even unachievable, but you’ll never get there if you approach the idea with a negative mindset! Try to break it down into smaller goals, and slowly make progress towards them.