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Savings Strategy For London First-Time Buyers

Posted 4 June 2020 by Keith Osborne

A recent survey shows first-time buyers could get themselves on the property ladder much sooner with a little research....

A recent survey has shown first-time buyers could get themselves on the property ladder much sooner if they spend their time doing some research.

A study by new mortgage and insurance advice service Saffron Mortgage Finders in May 2020 has identified some interesting findings for young professionals that could assist them in buying their first home, without too much disruption to their lifestyle and even offering some additional disposable income.

For many, buying a first home in London is unaffordable, and seems like a pipe dream. But comparing the average house prices in cities commutable from London to house prices in the capital, and looked at the cost of commuting to see if there was a saving to be had by living in these cities, led to some interesting findings.

One example: if a first-time buyer was to purchase their first home in Luton, commutable directly into London with a commute time of 38 minutes, the saving per year for a full term of a 25-year mortgage is £5,096.79 – not bad for a commute time of just 38 minutes. This is because the average house price in Luton is just over £272,000, a saving of nearly £207,000 on the average house price compared to London. This amount comes from a calculation of comparing the annual rail fare from/to Luton of £3,176 against a London Zone 1-5 travel card (£2,400), and the savings on the monthly mortgage repayment (not including interest).

However, this is not the case in other commutable cities. If a first time-buyer would like to choose Cambridge as their first-home base, based on the same formula and taking into account average house prices, it would be cheaper for them to buy in London as it would cost an additional £204 per year on mortgage repayments and travel costs (not including interest).

Colin Field, director of Saffron Mortgage Finders, commented: “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 minutes just getting from one side of London to the other.”

How do commutable cities compare?

 

City Average House Price Commute Time (Minutes) Saving Per Year  
Brighton £404,064 61 £817 Find new homes in Brighton
Cambridge £412,800 45 -£204 Find new homes in Cambridge
Chelmsford £397,779 35 £1,441 Find new homes in Chelmsford
Luton £272,181 38 £5,097 Find new homes in Luton
Milton Keynes £320,559 43 £2,173 Find new homes in Milton Keynes
Norwich £284,438 117 £422 Find new homes in Norwich
Oxford £410,000 55 £1,604 Find new homes in Oxford
Peterborough £241,180 50 £3,573 Find new homes in Peterborough
Reading £436,936 23 -£654 Find new homes in Reading
Southampton £227,100 78 £6,520 Find new homes in Southampton
Swindon £262,347 52 £1,046 Find new homes in Swindon

 

If a first-time buyer has aspirations to buy their first home on the warmer south coast of England, for 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.

If East Anglia is the region 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 paying the additional £3,088 on travel expenses.

Field continued: “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.”

Saffron Mortgage Finders offers a mortgage and insurance advice solution and works as a brokerage service for those looking for a new mortgage. Offering a highly personalised service, the service will be predominantly phone-based, giving consumers the flexibility to contact mortgage advisors from 9.00am to 5.30pm on weekdays and 9.00am to 2.30pm on Saturdays. Meetings will also be available at a Saffron Building Society branch, or the customer’s workplace, if requested.

 

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