First-time home-buyers facing their toughest challenge for 70 years
A REPORT by the Building Societies Association (BSA) paints a stark picture for first-time home buyers, suggesting they face the most challenging conditions in 70 years.
The report highlighted a reliance on dual high incomes or parental support among first-time buyers, whilst others find themselves trapped in the rental market due to soaring property prices.
Ben Thompson, the deputy chief executive of Mortgage Advice Bureau, one of the UK’s leading mortgage intermediary brands with branches in Derby, Leicester and Nottingham, has advised prospective buyers “not to panic”, stressing the need to use expert advice to navigate the difficulties.
Key findings in the report highlighted a confluence of factors contributing to this dilemma – mortgage rates, significantly higher than in the past decade, coupled with a 9.2% rise in rental costs over the last year, exacerbate the affordability crisis.
Moreover, stagnant earnings growth juxtaposed against soaring house prices presents a formidable barrier to entry for aspiring homeowners.
The BSA report went on to highlight an urgent need for systemic change, with its head of mortgage and housing policy, Paul Broad
head, stating that “new thinking and radical changes are needed.”
The report also emphasised the critical role of first-time buyers in sustaining a healthy housing market. It called for innovative solutions and regulatory flexibility to address the affordability gap, signalling a plea for action from policymakers.
As the housing landscape evolves, concerns extend beyond urban areas. Rural homeownership, once a beacon of affordability, now faces its own challenges with soaring prices, as noted by the County Councils Network.
Michelle Woolley, director of Derbyshire Mortgage Services, said one of the major issues first time buyers face is less the interest rates, and more the stagnation of pay.
“It depends how far you go back in history; compared to the last ten years interest rates are high, however interest rates we see today are more typical of expected market rates pre 07/08 banking crisis”, she said.
“The problem is that house prices have risen faster than wages so with higher interest rates coming back in and bigger mortgages because of higher prices this makes it extremely tough for first time buyers.”
For those looking at buying their first home, Michelle said to “not give up” adding: “I think you have to accept that if you are going to do it without parental help then it will be a long process saving a deposit, but my advice would be to break it down and get a long term savings plan.
“It’s not always possible but don’t be afraid to talk to parents. Relatives may not have the cash for a deposit but could you live rent-free while you save?
“There are a few mortgage schemes coming out now with less than 5% deposit, make sure you have a broker on your team who can advise on the latest schemes. Put yourself in the best position to get one of these schemes, work on your credit score, your savings and put yourself in the best position you can.
“You are potentially looking at five years of consistent savings or renting somewhere smaller than you’re accustomed to.
“Buying alone is becoming rarer and it’s harder as the cost of living is rising as a single borrower when you have to pay all those bills alone.
“Most mortgage companies will allow you to take one lodger, but not use the income to borrow more. This means the amount you can borrow is restricted to the multiple of one salary. Again, you may have to start lower down the ladder than you perhaps wished. Get into the property market and move on to your next property. It is called the property ladder for a reason. You can climb the ladder.”
As for prospective first-time buyers, Mr Thompson said one of the most important factors is getting ahead of the game by securing a mortgage in principle to determine your borrowing limit without a full credit check, providing assurance and clarity on what you can afford, thus lowering the likelihood of your mortgage application being declined. He added that speaking with a mortgage adviser can help evaluate your choices and investigate potential government or lender assistance programmes that may be available to you.
He added: “It’s been a particularly challenging time for homebuyers, especially those making their first move on the ladder. Higher levels of inflation mean that we’ve all been spending more to live day-to-day, which makes it that much harder to save for a deposit and get mortgage ready.”