Challenges Mount for Britons Seeking First Home Amid Unprecedented Obstacles
A recent report highlights the unprecedented challenges facing Britons aiming to purchase their first home, marking the toughest conditions in 70 years. Learn more about the daunting hurdles in the housing market revealed in the latest findings.
Britons looking to purchase their first home are currently facing the toughest conditions in 70 years. According to a recent report that was released on Monday, first-time buyers are struggling with high down payments and steep mortgage repayments. In the past, previous generations only had to deal with one of these challenges, but now it's a double whammy. The study was conducted by the Building Societies Association, a trade body representing almost a quarter of all mortgage lending in the UK.
"Becoming a first-time buyer can be very costly, possibly the most expensive it has been in the last 70 years," according to the BSA report. "At times, both the upfront costs of buying (down payments) and the ongoing costs of owning (mortgage repayments) have been quite high. This is the reality that many potential first-time buyers are facing today."
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The study shows that the average first-time buyer must provide a down payment of approximately £60,000 ($74,000), which increases to £144,000 ($178,000) in London. In London, it seems that assistance from family is almost necessary.
Mortgage rates have been increasing, leading to repayments reaching levels not seen since the global financial crisis, according to the report.
Potential homebuyers have been finding it difficult to afford homes due to the steep rise in house prices. The Office for National Statistics reported that average earnings in England and Wales have increased by 70% since 2002, while house prices have surged by 174%.
“At a national level, homes were affordable on average… until 2002, and not affordable after,” the ONS said.
Mortgage rates bite
Mortgage repayments have increased significantly since late 2021 when the Bank of England and other major central banks started raising official interest rates to reduce inflation.
About a year later, mortgage expenses surged once more when then-Prime Minister Liz Truss introduced her controversial "mini-budget" with unfunded tax cuts, causing concern among bond traders about the UK's public finances. (Some government bond interest rates affect mortgage rates).
On Monday, the average rate on a two-year fixed-rate mortgage was 5.82%, as reported by Moneyfacts. This is below the 15-year high of 6.85% seen in August last year, but still significantly higher than the 2.29% rate in November 2021 before the Bank of England began increasing interest rates.
According to the BSA report, which references data from UK Finance, first-time buyers were spending 22.5% of their gross monthly income on mortgage payments in November last year. This is a notable increase from the 16.8% recorded in March 2022.
The sharply higher repayments are “a big barrier to home ownership,” the report says.
A general view shows the London skyline, in London, Britain December 24, 2020.
A general view shows the London skyline, in London, Britain December 24, 2020.
Hannah McKay/Reuters
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Getting onto the housing ladder now often requires two incomes above average and assistance from parents. This has made it difficult for single individuals and those without family financial support to buy a home, according to the analysis.
As a result, many individuals find themselves unable to move out of private rented accommodation, leading to a state of being "stuck".
Residents in that area are also feeling the pressure. According to recent data from the ONS, the average rent increased by 9.2% in the year leading up to March. This is the largest annual rise since the ONS began collecting this information in 2015.
The Building Societies Association (BSA) suggests that with an upcoming election, a new government could show support for first-time homebuyers by recognizing the difficulties faced by younger generations, not just in housing, but in other aspects as well.
Editor's P/S:
The challenges faced by first-time homebuyers in the UK today are truly staggering. The combination of high down payments and steep mortgage repayments has created a perfect storm that is making it nearly impossible for many to enter the housing market. This is a far cry from the situation faced by previous generations, who often only had to contend with one of these hurdles.
The situation is particularly dire in London, where the average down payment is now a staggering £144,000. This means that many potential buyers are forced to rely on financial assistance from family members, which is not always feasible. The rising cost of housing, coupled with stagnant wages, has created a situation where homeownership is becoming an increasingly distant dream for many Britons.
