Sarah Pennells is a personal finance journalist and the face behind SavvyWoman.co.uk. We think she does a great job at explaining financial subjects in a very clear and accessible manner. You can find her column below where she writes about the latest financial news, and helps you get more from your money.
Want to get on the property ladder? Keen to buy your first home? The best way to get onto the housing ladder is to have wealthy parents, according to a new report. The Resolution Foundation, which is a think tank, says that it would take a first time buyer almost two decades (18 years) to save enough for a deposit from their wages.
In the late 1990s, it would have taken them just three years.
The report also says that a 30 year old with wealthy parents is three times more likely to be a homeowner than someone whose parents aren’t well off (in the 1990s, they would have been twice as likely).
So what schemes are available to help first time buyers with their deposit? The main ones are:
- Help to buy cash ISA: Here, you can save up to £12,000 into a cash ISA and get a 25% top up from the government, which would take your savings to £15,000. You will only be able to take out a new Help to Buy ISA until November 30th next year, but you’ll be able to top up your existing one until 30th November 2029.
- Help to buy equity loan: This scheme for first time buyers in England lets you borrow up to 20% of the cost of a newly built property (40% in London). You need to come up with a 5% deposit and you can get a standard mortgage on the rest. You can use it for properties costing up to £600,000. You don’t make any interest payments on the Help to buy loan for the first five years, but you have to repay the percentage of the property’s value that you borrowed
SAVVY TIP: There are similar schemes in Wales, Northern Ireland and Scotland. The scheme in England will change from April 2021, and the maximum price will be 1.5 times the cost of the regional average price paid by first time buyers.
- Family mortgages: Many parents aren’t in a position to give their children money for a deposit, but they may be able to help them through a family mortgage. Only a few mortgage lenders offer these, but they let a parent (or other family member) ‘park’ money for a deposit in a savings account that’s linked to their child’s mortgage. The money is normally ringfenced in this way for three years. The parent may not earn much, if any, interest on their money and can’t spend it while it’s locked up. The savings could be used by the mortgage lender if the mortgage payments aren’t made but, assuming all payments are kept up, the parents should get their savings back after a few years. Other mortgages let a parent use some of the equity in their home to guarantee a percentage of their child’s mortgage.
- Shared ownership: If you buy a shared ownership property, you don’t own it outright. Instead, as the name implies, you buy a percentage (typically 25%, but it can be more or less). You pay your mortgage on the percentage you own and pay rent on the rest. You can ‘staircase’ and buy more of the property as and when you can afford it.
Pensions dashboard to launch next year
From next year you should be able to see how much you’ve saved in your pensions, in one place. The idea behind the ‘pensions dashboard’ is that you’ll be able to see what you’ve saved in workplace and private pensions, and how much state pension you’re entitled to.
The government confirmed the launch date of 2019 at the start of December. Earlier this year it looked like the project might be killed off, because of an apparent lack of support for it from some government ministers. I think this would have been such a bad decision, as it’s so important that people are able to see exactly what they’ve saved for their retirement.
Perhaps confusingly, it looks like there will be different versions of the pensions dashboard. Some might say that as long as they all show all the information in a clear way, it doesn’t matter how many are out there. I think it would be better if there was one pensions dashboard website and app that everyone knew and could have confidence in.
Subsidence claims soar
The long, hot summer may feel like a lifetime away, but thousands of homeowners are dealing with the consequences. According to the insurers’ organisation, the Association of British Insurers (ABI), there’s been a sharp increase in the number of claims for subsidence. Subsidence is where a property’s foundations move because the soil they’re in dries out. This causes large cracks in the walls. The ABI says that 10,000 people made a claim for subsidence damage between July and September.
Subsidence can be caused by prolonged spells of dry weather (as we had this summer) or by trees planted too close to a property, which take up the water in the soil. Some parts of the country, especially where there’s a clay-based soil, are more prone to subsidence than others.
Unlike harmless cracks in the wall, subsidence-related cracks are normally diagonal and are thicker than a 10p coin. If your home is suffering from subsidence, tell your insurer and they will arrange for the damage to be repaired.
SAVVY TIP: If you’re thinking of buying a flat or house, especially if there are trees nearby or it’s in an area with clay soil, it’s especially important to get a proper survey and not to rely on the mortgage valuation.
Boiler cover – is it worth it?
I don’t know how central heating boilers work out the most inconvenient time to break down, but they do (a boiler of mine once decided break down on New Year’s Eve!). The choice is whether to rely on the fact you’ll be able to get hold of a reliable heating engineer, or take out a service contract (boiler cover). But boiler cover may not give you the peace of mind you’re hoping for. Why not? Well, for a start, policies don’t cover everything.
Most will not pay out if your boiler breaks down because of a buildup of sediment. To sort that out, you’ll often need to get the system power flushed, which normally costs several hundred pounds. On top of that, some policies will only pay out a few hundred pounds if your boiler is more than a certain age (which could be as little as seven years old) and can’t be repaired.
These are my tips for buying boiler cover:
- Work out if you need it. I took out boiler cover after I moved into my first flat. I’d already had to pay for one expensive repair to my boiler, and I was worried I wouldn’t be able to afford another one. In the event, the boiler did break down again and the service contract was worth every penny. But after I replaced the boiler a few years later, I didn’t renew it.
- Invest in a reliable boiler. Not all boiler brands are as reliable as each other (I learned this the hard way!). A good independent heating engineer will tell you which brands they rate, or you can do your research online.
- Get your boiler serviced every year. It’s like getting your car serviced and it means you can spot potential problems before they become major ones (such as worn washers, for example).
- If you want to buy boiler cover, shop around. Check what the boiler manufacturer offers and compare this to independent companies and energy providers.
Buying charity Christmas cards
I don’t know whether you send Christmas cards or whether you prefer to send electronic cards (or just a text or WhatsApp message!). But if you prefer to buy traditional, paper cards, buying charity cards is a great way of supporting your favourite good cause.
You’ll give the most to charity if you buy direct from the charity itself or from a specialist charity cards website or pop-up shop. The ‘Cards for Charity’ website passes on almost 70% of the purchase price to charities – and there are dozens of charities for you to choose from.
Supermarkets and department stores also stock charity Christmas cards, and here -typically – between 10% and 25% of the purchase price will go to charity. Some supermarkets choose one charity to support each year, others split it between several.