Your Guide to Buying an Affordable Home in the U.K.

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The U.K. isn’t the cheapest place to live in. The average British home costs £261,221, or roughly $356,130. In December 2021, many lenders increased their mortgage rates following the decision of the Bank of England to raise their interest rates from 0.1% to 0.25%.

As such, the cheapest place you’d find in the U.K. can still be pricier than you’d imagine. And it’s not easy to find the “perfect,” affordable home. Many factors can affect your options, such as your job, family, and social life. In most cases, living in a cheap home means residing far away from the city. It would make your access to your workplace and hangout spots a lot harder.

But work-from-home is reducing the issue of accessibility. If your company can maintain remote work after the pandemic, you shouldn’t have any problems living off the grid.

Concerning your social life, well, the pandemic limits social gatherings anyway. Besides, you can also find fun in quieter places. Seeing your friends once in a while when you’re all healthy is better than seeing them every day when you’re all at risk.

That said, a cheap home in a suburban location can also give you the life you dream of. So without further ado, here’s your cheat sheet for buying an affordable home in the U.K.

The Lowest Mortgage Rates

Only a few lenders charge interest rates below 1% as of January 2022. If you buy a new home or remortgaging, expect a 40% down payment with 0.99% interest. That’s the cheapest two-year fixed rate of the Progressive Building Society. Your total payment should also include the £955 fee. If you can make a 60% deposit, the Progressive Building Society can reduce your interest to 0.51%.

The following lenders also offer the lowest rates, but some of them are only available for those who will remortgage. As such, if you’re moving to a new home or buying one for the first time, these rates may not apply to you. To secure an affordable mortgage plan, seek help from a trustworthy mortgage broker.

  • Progressive Building Society: 0.51% to 0.89%, available for a remortgage, a new purchase, and first-time buyers
  • The Cumberland Building Society: 0.83%, for remortgage only
  • Barclays: 1.11%, for a remortgage, a new purchase, and first-time buyers
  • Yorkshire Building Society: 1.12%, for remortgage and new purchase only
  • Nationwide: 1.19%, for remortgage and new purchase only
  • Santander: 1.24%, for remortgage and new purchase only

All buyers charge a product fee, which plays between £1,000 and £2,000, more or less. To increase your chances of getting a favourable term, improve your credit score. Look for a two-year deal with a 40% deposit you can afford. If you are self-employed, study the qualifications of lenders; some of them don’t give loans to self-employed applicants. In addition, some deals are only available to borrowers in England and Wales.

How Much Money Do You Need to Save?
coins beside with a blue piggy bank with a miniature house on its head

The average price of cheap homes in the U.K. is around £150,000- £200,000. Hence, if you’d make a 40% down payment, you need to save about £80,000. The amount you can borrow may range from £140,000 to £190,000.

To save that much money, you need to make around £27,000 to £47,500 every year.

The Cheapest Places to Live in the U.K.

To get a clearer picture of where you might find a cheap home, here are the top-notchers in the list of U.K.’s most affordable cities:

  • Derry, Northern Ireland

The average price of a Derry home is £155,917. Working in this city pays around £33,138 every year. That’s a price-to-earnings ratio of 4:7.

  • Carlisle, North West England

Homes in Carlisle cost an average of £163,232. The average annual income in this city is £34,087, creating a 4:8 price-to-earnings ratio.

  • Bradford, Yorkshire, and the Humber

The average home price in this city is £164,410. The average salary is £34,219 every year, or a price-to-earnings ratio of 4:8.

  • Stirling, Scotland

The average home price in this Scottish city is a little higher; £208,927. You can make £38,744 in this city every year, which creates a much lower price-to-earnings ratio of 5:4.

Should You Just Rent?

If the rates still intimidate you, renting would look like an easier option. It’s cheaper, but not easy on the pockets either. Landlords also require a down payment, which includes a four to six weeks deposit as well as your first month of rent. The tenancy may be short-term, lasting only three to six months. However, this can have an advantage because if you don’t like your place, you can move out in just a few months. Plus, renting spares you from hefty maintenance costs, legal fees, and stamp duties.

But of course, you can’t call a rented place your own. At the end of the day, it’s more secure to live in a place you truly own. So if you can afford to buy a cheap home now, look for your dream place and become a homeowner in no time.

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