'Perfect storm' pushing homeownership out of reach for most UK house hunters

Growing numbers of first-time buyers and remortgagers now believe that homeownership is becoming an elite privilege, according to to concerning new analysis from YBS.

Related topics:  Finance,  Property,  homeownership
Property | Reporter
1st November 2023
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"It’s encouraging, after almost two decades of unusually cheap credit have likely led to some less responsible spending habits, that people are starting to take the financial commitment homeownership represents more seriously, and cutting their cloth accordingly"
- Ben Merritt - YBS

A perfect storm of factors is making buying a home in the UK harder than it has been for over a century, according to research commissioned by Yorkshire Building Society.

In its ‘Home Truths’ report, 500 first-time buyers, 500 remortgagers and 500 landlords share what they really think of the current mortgage and housing markets.

The increased cost of living, historically high house prices and interest rates at levels last seen almost two decades ago are the main reasons people are struggling to invest in bricks and mortar. But they still want to, with 37% of first-time buyers planning to purchase in the next year – 53% would like to stop wasting money on rent; 29% to renovate and create a ‘place to call home’; and 38% to buy as an investment.

Unsurprising, perhaps, given renting is no longer the easy option, with increasing costs also impacting landlords and, as a result, their tenants. 61% of participating landlords stated the rental sector is becoming less attractive as an investment proposition.

Meanwhile, a critically short supply of privately rented housing could leave those needing help most stranded, as the findings suggest those landlords serve couples with dependent children (34%), single-parent households (18%), the low-paid (9%) and those with disabilities (4%).

However, the good news is the majority of private landlords are still committed to doing their bit to stem the shortfall, with 66% intending to stick around for at least five years. 38%, though, say the Government should do more to support the rental sector in light of changes to regulation and taxation which are making it harder for them to operate profitably.

When it comes to mortgages, the growing minority of borrowers don’t fit the ‘vanilla’ mould, as a result of changing societal dynamics. Therefore, 78% of first-time buyers and nearly as many remortgagers (73%) indicate that homeownership is becoming an elite privilege, due to factors like the changing make-up of income and rising house prices.

Ben Merritt, director of mortgages at Yorkshire Building Society, said: “The reality is that family structures are changing due to things like greater life expectancy prompting a rise in multigenerational living. More people are working for themselves, or employed as contractors, meaning they have unstructured incomes; while factors like the shift to hybrid working following the global pandemic are changing what they want from a home, and therefore their borrowing needs.

“As a mutual building society, this means we have come full circle, and are stepping in to provide outside-the-box solutions - just as we were set up to do back in 1864. We’ll continue to rise to the modern-day challenges by innovating to offer today’s borrowers suitable pathways to home ownership.”

The findings also highlight that consumers are making significant changes to overcome the affordability challenge and get a foothold on the housing ladder, with 86% making responsible lifestyle choices to prioritise the biggest investment most of them are ever likely to make.

Of these, 55% were prepared to forego holidays, 49% eat out less and 38% buy less new tech. Almost all first-time buyers surveyed (94%) were saving towards a deposit, expecting that to take them four-and-a-half years on average.

Other examples of how people are adapting include:

Buying homes later and looking to pay them off over a longer period of time - the average age of first-time buyers taking part in the research was 35 and 58% of them confirmed they would be buying a house later than intended as a result of the current economic climate.

Furthermore, 72% of mortgage holders are considering extending their mortgage terms – 84% of those into retirement, with an average age expectation for paying them off, of almost 70 (69.9 years).

Seeking financial support from parents was an option for almost a third of first-time buyers (29% - with an average amount given £18,000), and from wider family members like grandparents, aunts and uncles for one in ten (11% - average gifted amount £17,575).

17% of first-time buyers believe there isn’t enough suitable property currently available to meet the population’s evolving housing needs.

Ben continued: “We’re committed to helping borrowers navigate these challenging times by lending purposefully – directly to consumers, through our Accord brand, which lends to a significant number of consumers via mortgage brokers, and via YBS Commercial Mortgages, which offers solutions to commercial landlords and small and medium-sized businesses.

“If ever the industry needed a burning platform, the findings in the report are it. We’re determined the progress we’ve made over the past century-and-a-half shouldn’t be lost. Ground-breaking modern solutions are needed from lenders like ourselves, and other industry stakeholders including the government, to ensure the mortgage and housing markets continue to meet the needs of current and future generations.

He concludes: “It’s encouraging, after almost two decades of unusually cheap credit has likely led to some less responsible spending habits, that people are starting to take the financial commitment homeownership represents more seriously, and cutting their cloth accordingly. These good financial habits will stand them in good stead in all aspects of their lives.

“We’ll continue to do our bit to support their efforts by looking for more ways to help borrowers overcome this historically challenging time.”

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