Affordability concerns for first-time buyers

Raising a deposit is still the biggest hurdle for first-time buyers despite affordability becoming more stretched, according to Nationwide.

High house prices relative to average earnings continue to make raising a deposit a significant barrier for first time buyers. 

Residential property prices have risen quicker than earnings over last year resulting in increase in cost of servicing a mortgage relative to take-home pay. 

Nationwide reports that the north region and Scotland remain most affordable for those looking to buy property. 

Managing Director of Barrows and Forrester, James Forrester, commented: “Much has been made about the government’s success of negotiating the pandemic where the property market is concerned. While it’s fair to say the market has never looked stronger, this statement is one based largely on perspective. 

“If you own a home and have enjoyed a double-digit increase in value over the last year, you’re no doubt over the moon. However, those struggling to piece together a sufficient deposit are unlikely to share this opinion.

“The cold reality is that if you aren’t looking to buy with the financial support of a second wage, support from the Bank of Mum and Dad, or you don’t earn considerably more than the average person in your respective area, the dream of homeownership is one you’re unlikely to realise until much later in life than you might like.”

Marc von Grundherr, director of Benham and Reeves, commented: “We’ve seen a respectable level of wage growth in recent years but unfortunately this hasn’t been enough to match the might of the UK housing market. At the same time, record low interest rates over such a prolonged period of time have been great for those taking their first step on the property ladder with a mortgage, but they’ve been terrible for those attempting to save. 

“Even in London, where house price growth has been fairly muted in comparison to much of the UK and wages are more robust, the barrier to homeownership is still incredibly high. 

“Unfortunately, there’s not a great deal that can be done although the cyclical nature of the property market does suggest what goes up, will come down. So sitting tight and waiting for a correction is probably the best immediate bet open to struggling homebuyers.”

Karthik Srivats, co-founder of mortgage lender Ahauz, said more needs to be done to help first-time buyers.

He commented: “With affordability stretched like never before, first-time buyers will seek a record high of £10billion in support this year from their parents and friends in an effort to scrape together a deposit.

“The hot market means the gap between house prices and earnings has never been greater, and things are only going to get far tougher when the government’s Help to Buy scheme ends in 2023.”

“Though the report says that the effects of interest rate hikes on the wider housing may only be moderate, that will come as little consolation to those who have yet to get a foot on the ladder,” he added. “The need for more innovative finance measures has never been more pressing.”

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