After purchasing their first home, one in 10 (10%) first-time buyers expect to have less than £200 left each month, while one in 20 (5%) believe they would have nothing at all to live on, according to Yorkshire Building Society.
And two-thirds (64%) are worried they won’t be able to afford to put any cash away once they have bought a home.
For other potential first-time buyers, the picture is clearly less stark, with the average amount respondents to the Society’s survey envisage having left each month after covering bills and essential expenses, being £752.
Overall, 55% of would-be first-time buyers are still lured by the prospect of no longer ‘wasting money’ on rent. Ben Merritt, the mutual’s director of mortgages, said:
"This apparent disparity in fortunes amidst the likelihood of a continued downward trend in interest rates, presents the mortgage industry with a prime opportunity to step in. He called for better education for first-time borrowers to help dispel myths and equip them to manage their budgets effectively, as well as the introduction of further measures to assist them."
The mutual has taken its own steps to help bridge the awareness gap facing this crucial borrower group, by offering its new Doshi tool which takes would-be first-timers through the home buying and selling process, step by step. They can access the resource, the result of the Society’s partnership with financial education provider Doshi, via the mortgage section of its website.
Ben said the market expects falling interest rates to make monthly mortgage payments gradually cheaper over the next 18 months.
"If this comes to fruition, the positive momentum, combined with moves to further improve affordability for first-time buyers, could mark a step-change after their years of struggling to navigate record-high house prices, the increased cost of living and regulatory restrictions around how much they can borrow. Measures could potentially include the introduction of a new, more fit-for-purpose replacement for the former Help to Buy scheme, and a review of affordability regulation to loosen the ties preventing lenders from innovating to help this vital group onto the property ladder."
Ben’s call echoed the sentiments expressed by the first-time buyers in the Society’s survey, 32% of whom wanted to see the Government increase the availability of affordable housing; with 40% calling for lower interest rates and 33% saying they would welcome more flexible repayment options that would bring their monthly costs down.
The Society recently launched its Home Improvements policy paper with a Parliamentary reception, where it drew attention to its own proposals among key industry stakeholders from politicians to house builders, to try to promote action.
This follows the launch of its own innovative solutions to directly support first-time buyers, including the launch of its £5k Deposit Mortgage earlier this year, which enables people to buy a house worth up to £500,000 with a deposit of just £5k.
It has redoubled its efforts since its own analysis calculated the wealth gap experienced by those forced to rent for life, could amount to as much as £2.6million, an increasing threat as 58% of non-homeowners aged 35 to 54 said they were in danger of giving up on the idea of homeownership altogether, due to the seemingly insurmountable obstacles they face.
“What never ceases to amaze us, is the determination first-time buyers are showing amidst historic challenges to their right to homeownership, in the form of record-high house prices and the raised cost of living,” continued Ben.
“Yet again, this latest research shows that they want to own and are prepared to change their lifestyles to achieve it; they simply want to be able to afford a reasonable quality of life as well, which doesn’t seem like too much to ask from where we’re standing.
“Although nothing is certain in a volatile market like the one we’re continuing to experience, and we are seeing ongoing fluctuations in interest rates, we hope that they will continue to settle out overall and this will help ease one problem for first-time buyers, which is meeting their monthly mortgage payments.
“But this latest cry for help is a clear sign that we need to take a holistic look at all the factors at play and ask what else can be done by the industry at large to ensure owning a home is the start of a positive new life chapter, as it should be, and not a shackle stopping people from enjoying it to the full.
“Buying a home is a big commitment that should be taken seriously. People do need to be realistic and set their budgets accordingly, and to some extent it’s about weighing up short-term sacrifice against the clear long-term gain of owning their own property. However, we don’t believe buying a home should mean foregoing all of the things which make life worth living.”
Nine-in-10 respondents to the survey of 1,000 non-homeowners looking to purchase a home in the next three years; commissioned by Yorkshire Building Society and undertaken by Opinium, said they will have to sacrifice something to afford their mortgage, with the most common cost cuts being holidays and travel (42%), dining out (36%) and buying new tech (27%).
At the same time, 73% said they would be willing to buy a smaller property to help them afford their mortgage; while 65% would consider paying off just the interest for a temporary period. As for the biggest challenges preventing them from getting on the property ladder, 48% cited high house prices.
There are also notable differences in the disposable income prospective buyers expect based on their age. Those between 25 to 34 anticipate having the most, with an average of £802 remaining each month. In contrast, those aged 45 to 54 expect to have the least, averaging just £622.
