With house prices rising at their fastest pace in nearly two years and inflationary pressures still putting a strain on the household and personal finances, getting onto or up the property ladder can feel out of reach for many. According to Statista, the average first-time buyer deposit in the UK was about £53,414 in 2023, and for buyers in Greater London, their deposit could be more than double this. This combined with general affordability challenges is exacerbating the struggles first-time buyers face.
Barriers to homeownership
Although we are starting to see shoots of recovery following the cost-of-living crisis, our research found that nearly two fifths (37%) of potential first-time buyers identified general affordability and the cost of living crisis as their main barrier to getting onto the property ladder. This was closely followed by the ability to raise a large enough deposit (34%) and not having a sufficient income to get a mortgage (33%).
Homemovers face similar challenges in stepping up the property ladder. Over two fifths (43%) said house prices were their biggest concern, followed by 37% who said mortgage interest rates. Unsurprisingly, the cost of living crisis is having an impact on home movers too, with more than a third (35%) pointing to this as their biggest barrier to homeownership. This is having an impact on their ability to raise a large enough deposit to step up a rung, as well as affording the additional fees associated with securing a mortgage.
Market innovation
Fortunately, the industry has responded to the challenges first-time buyers and home-movers face in today’s market, providing solutions to suit their unique circumstances. Firstly, we have seen increased lender innovation to create longer-term mortgages, with the rise of the 40 year mortgage, which is helping first-time buyers get their foot onto the property ladder with lower monthly payments. According to financial data site Moneyfacts, 84% of mortgages on the market now have a maximum term of 40 years, compared to two years ago, when this figure was 57%.
Secondly, a growing number of lenders have started to offer low deposit mortgages in recognition of the affordability challenges. Schemes such as Deposit Unlock and Shared Ownership could prove to be the lifeline that people need to achieve their homeownership dreams and fill the void left by the end of the Help to Buy scheme. However, there is still a lack of awareness of these offerings. Only a third (36%) of consumers are aware of Shared Ownership, and less than one in 10 (8%) are aware of Deposit Unlock and how it could help them.
With the Autumn Budget fast approaching, all eyes will be on the Government to see if further support measures will be introduced. While housing stock is, and should be a priority, just as important is providing innovative solutions that help buyers get onto the property ladder, as well as answer the affordability pressures that prospective buyers face in today’s environment.
Value of advice
Brokers have a vital role to play in guiding both first-time buyers and those hoping to climb the ladder through the complexities of the market. Financial pressures are having a notable impact on confidence for both groups of people looking at mortgage options. With the barriers to buying looming over their clients, brokers can help them figure out how to hurdle these whilst the challenging conditions continue.
Looking ahead, the focus needs to be on raising awareness of innovative solutions to tackle the challenges associated with getting onto the property ladder. Brokers can do this by not only marketing their services and demonstrating where they can add value, but highlighting the range of products available to help customers with smaller deposits achieve their homeownership ambitions.
