When it comes to the property market, young people in the UK are facing an exceptionally challenging and turbulent climate – are there alternative ways to buy a house though?
With skyrocketing property prices, record-breaking mortgage rates and the help to buy scheme ending, it’s hard to imagine a more challenging period for first time buyers.
So, if you’re looking to buy a property for the first time, you may well feel dismayed by the current state of affairs. But, you don’t need to give up on your aspirations yet. In fact, many first time buyers are currently pursuing a wide range of alternatives, which offer far more affordable and viable solutions.
So, keep reading to find our guidance about what to do if you’re currently struggling to afford a house, and to learn more about the most popular alternative ways to buy a house in the UK.
What challenges do first time buyers face?
According to analysis conducted by finder.com, the average age of first time buyers in the UK is 34.
The average deposit for first time buyers rose by 8% from 2021 to 2022, and the average house price for first time buyers increased by a staggering 13% from 2021 to 2022.
Given the current climate, it’s hardly surprising that first time buyers are facing a number of challenges.
The most common challenges that a first time buyer may encounter include:
- Rising house prices
- Unpredictable mortgage rates
- Securing a mortgage loan
- Bidding wars and competition when submitting offers
- Extra unexpected costs (such as legal fees)
- Finding the right property
What to do if you can’t afford a house?
If you’re struggling to afford a property, know that you’re not alone. This is a challenge that, unfortunately, a huge number of young people are facing right now.
But, if you’re finding it difficult to meet these costs right now, there are steps that you can take to help put yourself in a better position. Then, you can recommence your search in a few years’ time.
Potential strategies that you can use to gradually improve your financial situation include:
- Creating a budget for your spending
- Establishing a monthly savings plan
- Setting up a dedicated savings account
- Consider rent to buy – if you’re wondering ‘what is rent to buy’, this is an arrangement, that enables a to rent a property (usually for a fixed period), before enabling them to purchase it later on
- Learning more about the property market, and how the system works
- Working to increase your income – this could be by looking for additional freelance work, setting up a side business, or working towards a higher position at work
- Improving your credit score
- Exploring other potential options (keep reading for suggestions)
- Seeking financial guidance
Although it can feel like a difficult situation to overcome, buying a house is a huge step – both personally and financially. So, it’s by no means uncommon for first time buyers to need some extra time to prepare themselves for the commitment.
But, with some patience and a long-term focus on saving, you can quickly improve your position.
What help is out there for first time buyers?
As we mentioned above, there are also a number of highly viable alternatives to a mortgage and conventional house-buying (given the current property market, it’s hardly surprising that these are becoming more popular!).
Rather than taking the conventional route of securing a mortgage and making a down payment, these solutions may help you to take that first step onto the property ladder, in a way that better suits your personal situation.
5 alternative ways to buy a house in the UK:
- Buying a property through shared ownership – through shared ownership, you can buy a portion of a property rather than buying it outright. The buyer pays a mortgage on the portion you own, then pays rent on the share that you have not bought. Typically, you can usually buy a portion of a property ranging from 25-75%. If, over time, you are in a position where you would like to increase the share that you own, you can do this through a process called ‘staircasing’. To find out more about shared ownership and your eligibility for the initiative, check out this handy link.
- Buying with a friend, partner or family member – if you have someone who you trust, who would be in a position to buy with you, then you could go through the process of co-buying. This works by halving the deposit, then splitting the mortgage repayment (and the other bills) equally. Not only will this help to keep the payments more manageable, but it will also help you to secure a larger mortgage. In fact, depending on your lender, you can share a mortgage between up to four people.
- Buying a property at auction – auctions are a fantastic way to (fingers crossed) buy a property at a significantly lower price. You can research the properties being auctioned in advance, and then either attend the auction in person, or place your bids via the phone or online.
- Asking your family for support – if a family member is in a position to help, you could discuss potential options with them. There are a number of potential ways they could help you get on the property ladder, including a mortgage with a guarantor, a family deposit mortgage, or a family offset mortgage. Speak to a financial advisor, to see which would provide the best fit for you.
- Building an annexe at your family home – we’ve covered this in more detail below.
What is an annexe?
If you’re thinking you might have heard the term annexe before, it’s probably from the phrase ‘granny annexe’.
Typically, annexes have usually been built for older people, who have decided to live with their children or other family members. This is most commonly done if the person is at an age where they need extra support, but not quite the extent of the support that a care home would offer. So, an annexe enables them to be close to their family and enjoy greater freedoms, while still having this support system nearby.
Over recent years, young people are becoming increasingly interested in investing in annexes. Now, these are being increasingly seen as a viable alternative to a mortgage and buying a house.
An annexe is a living space that is self-contained, and completely separate to the main property. But, it sits alongside the larger main property, as an extra living space. This means that it has its own kitchen and bathroom, as well as its own independent entrance.
So, if your property has sufficient space, an annexe presents a fantastic solution for young people living with their parents.
What benefits do annexes offer, as an alternative to buying a house?
Annexes can unlock significant benefits, for everyone involved.
With an annexe, young people can enjoy all the freedom and independence that comes with moving out, at a fraction of the price.
Plus, it can significantly increase the value of the property. Then (depending on the specific arrangement that you put in place) when the property is sold, the person living in the annexe can receive a cut, for the added value that the annexe has contributed.
The benefits of investing in an annexe include:
- A far more affordable option, compared to buying a separate house
- Complete flexibility with regards to the design and layout of the property
- The opportunity to fully personalise your new home
- Complete independence and privacy
- The opportunity to still get support from your family
- A soft launch into buying your own property and living independently
- Increasing the value of the main property
- A great investment (especially given rising property prices!)
- Saving on moving costs
What’s more, with the help of an annexe specialist like iHus, you can create a modern, luxurious annexe, which is completely bespoke to you. Working with a professional team, you can design an annexe that fulfils all of your specific requirements, and represents a fantastic long-term investment.
So, if you want to find out more about why annexes are becoming one of the most popular alternative ways to buy a house, our team is on hand to help.