Working in London provides all the amenities and connections of a big city, but buying a home – especially for a first-time buyer – can be daunting. And that’s not surprising, given the average house price in London has skyrocketed to a whopping £490,000.
And things could get even more difficult after Rishi Sunak announced Stamp Duty is being cut to try and restart the housing market after months of stagnation. This could adversely affect first time buyers according to one think tank.
The Institute for Fiscal Studies has warned house prices will rise, which will punish first time buyers already largely exempt from the levy.
Helen Miller, the IFS’s deputy director said: “This is a group that might actually be made worse off by the policy.
She argued when those taking the first steps on the housing ladder were the only group escaping stamp duty, they “retained” the benefit.
House prices: How you could save £5,000 a year
Ms Miller added: “Now it is across the whole market, it’s more likely that prices will rise and therefore first time buyers could be left keeping less of the discount.”
However, for those working in the capital, buying a home is not out of the question.
A recent study by new mortgage and insurance advice service Saffron Mortgage Finders has identified some interesting findings for young professionals which could assist them in buying their first home.
The study, undertaken in May 2020 compared the average house prices in cities commutable from London to house prices in the capital.
It looked at the cost of commuting to see if there was a saving to be had by living in these cities – and the findings revealed where the biggest savings could be found.
House prices: Cutting Stamp Duty could adversely affect first time buyers
The study proves a little research could have you working in London, commuting from your home and even saving money in the process.
As an example, if a first-time buyer was to purchase their first home in Luton – a city commutable directly into London – the saving per year for a full term of a 25-year mortgage was an unbelievable £5,096.79.
And this is on top of a commute time of just 38 minutes.
So how do first-time buyers save so much?
The average house price in Luton is just over £272,000 – saving nearly £207,000 on the average house price compared to London.
House prices: For those who work in London, if you look further afield, you could save money each year
With the additional travel cost of £3,176 against a London Zone 1-5 travel card (£2,400), the savings on the monthly mortgage repayment, not including interest, is more than £5,000.
However, this is not the case in other commutable cities.
If a first-time buyer would like to choose the beautiful city of Cambridge as their first-home location, the same formula and average house price would actually cost you more than living in the capital.
Cambridge would cost an additional £204 per year on mortgage repayments and travel costs (not including interest). and would be cheaper for them to buy in London.
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Colin Field, Director of Saffron Mortgage Finders said: “It is common to discuss the difficulty of buying your first home in London and it is always advisable to explore house prices – in all areas.
“Getting on the property ladder might not be as difficult as expected, it just requires some time to research, plan and budget and if done cleverly, it does not have to financially or physically disrupt your lifestyle.
“It is common to commute up to 45 mins just getting from one side of London to the other.”
If a first-time buyer would like to see some sun and sand, they can buy their first home on the warmer south coast of England.
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And an extra 17 minutes commute you can save an impressive £5,703 per year by choosing to buy your initial home in Southampton as opposed to the heftier prices of Brighton.
Don’t discount Brighton entirely though, as you could still save £817 a year by choosing the popular seaside destination.
If East Anglia is your area of choice, choosing a five minute longer commute to Peterborough as opposed to Cambridge for your first home, would save £3,777 per year on your mortgage repayments – even when paying the additional £3,088 on travel expenses.
Mr Field said: “This is a real eye-opener for first-time buyers.
“Choosing to buy in a more affordable city can not only get you on the property ladder but the saving on mortgage costs, even taking into account the additional travel expenses, will ensure your quality of life will not be affected, as you will have more expendable income.
“A saving of over £3,000 per year is more money for home improvements or to put aside and save for a rainy day.
“Saffron Mortgage Finders offer a sourcing service for the most competitive first-time buyer mortgages and with more products offering impressive deals – a first-time buyer could find themselves in a better situation than they think.”
House prices: Buy in Luton to save around £5,000
How do commutable cities compare?
Average House Price as of April 2020: £412,800
Commute time – 45 minutes
Yearly saving – -£204
Average House Price as of April 2020: £227,100
Commute time – 78 minutes
Yearly saving – £6,520
Average House Price as of April 2020: £410,000
Commute time – 55 minutes
Yearly saving – £1,604
Average House Price as of April 2020: £284,438
Commute time – 117 minutes
Yearly saving – £422
Average House Price as of April 2020: £320,559
Commute time – 43 minutes
Yearly saving – £2,173
Average House Price as of April 2020: £436,936
Commute time – 23 minutes
Yearly saving – -£654
Average House Price as of April 2020: £241,180
Commute time – 50 minutes
Yearly saving – £3,573
Average House Price as of April 2020: £272,181
Commute time – 38 minutes
Yearly saving – £5,097
Average House Price as of April 2020: £262,347
Commute time – 52 minutes
Yearly saving – £1,046
Average House Price as of April 2020: £404,064
Commute time – 61 minutes
Yearly saving – £817
Average House Price as of April 2020: £397,779
Commute time – 35 minutes
Yearly saving – £1,440.84