Getting onto the housing ladder

First-time buyers (FTBs) have been struggling for some time to get onto the housing ladder. Now, with food, energy and mortgage costs surging, it’s getting harder. Nationwide has just published some new research which reveals the true extent of the issue.

Their survey of 2,000 aspiring FTBs found that of those who were planning on buying in the next year or so, as a result of the rising cost of living, 70% had been forced to delay their purchases. Most said they would put it on hold for around two years, but 19% said it could be for more than three years.

With the average deposit for FTBs around £61,000 (source: Barclays), it is, unsurprisingly, one of the biggest barriers to entry to the housing market. And, in the current inflationary climate, 88% of FTBs said their ability to save it had been severely impacted. 38% went further, saying they were now having to raid their savings rather than adding to them. Many have responded by trying to cut down on their expenditure. Below are some of the key areas where they are making savings:

47% have reduced everyday spending

 43% have cut back on going or eating out

 37% have reduced their household bills by shopping around

 36% have sold some of their possessions

 35% have cancelled unused subscriptions

 23% have moved to a savings account that rewards homebuyers (e.g. Lifetime ISA, Help to Buy ISA etc)

 21% are now using cashback deals

 20% are also using a savings or budgeting app

 17% have taken on an additional job

 12% are putting off starting or adding to a family

The situation is also making FTBs consider moving to new areas, with 69% now willing to do so in order to get a bigger property. It also means many are having to buy far later in life. Even though most hope to own their first property by the age of 27, 30% admit that is unlikely and 33% of those interviewed had already passed that point. The average age of an FTB, however, is 32.

Under the circumstances, putting off a purchasing decision may appear to be a wise decision, but there are some good reasons why they shouldn’t:

1) Mortgage rates are already rising and are likely to climb even higher in the next year or two. Buyers will therefore make substantial savings if they lock in a low 5-year rate before they do.

2) What’s more, if the economy goes through a sticky patch, as seems likely, lenders are likely to become more cautious, limiting their exposure to the housing market by pricing out the riskier borrowers from their mortgages – i.e., FTBs.

3) Demand in the rental sector is already substantially outstripping supply and rents are rising. The cost-of-living crisis and delays in purchases by FTBs will push them even higher, making it far harder, moving forwards, to save for a deposit.

4) Although the economic conditions will soon have an effect on house prices, they are still expected to keep on rising, just at a slower pace, pushing them further and further out of reach.

5) Whatever happens in the short-term, people always stay longer than they expect in their homes and, in the longer-term, house prices always rise.

If you are a first-time buyer and want some advice, why not give us a call at Sears. We have plenty of experience in helping FTBS get on the property ladder and we have lots of exciting properties for you to see.