The affordability hurdle for first time buyers

The challenges for first-time buyers in getting onto the property ladder have been well documented with lack of supply, the cost-of-living crisis, high interest rates and difficulties in saving for ever-increasing deposits all playing their part. With the constant commentary in the media of these issues, you’d be forgiven as a first-time buyer if you believed that home ownership feels unattainable.

Unfortunately, a YouGov survey for the Building Societies Association carried out last year backs this up with an increase in the proportion of respondents that want to buy their own home but don’t think they will be able to – from 25% in March 2020 to 32% in March 2024.

With almost 1 in 3 potential borrowers believing that home ownership is out of reach, it’s vital that as an industry we understand whether this is perception or reality.

The Skipton Group Affordability Index

The second iteration of the Skipton Group Affordability Index has just been released and it reveals some stark findings for parts of the UK.

According to it’s data, nearly 90% of potential first-time buyers cannot afford to buy a typical first home in their local area based on their personal financial situation alone (i.e. without the ‘Bank of Family’).

It also found that nearly 40% of potential first-time buyers find are spending more than 45% of their household income on essential housing costs.

So what can be done?

For Skipton Group, our next job is to share these findings with government and policymakers – we are ready to inform and contribute to the wider conversation of the challenges being faced by the factors that are limiting access to the housing market for first-time buyers.

As lenders, it is vital that we continue to innovate - as a father who used Joint Borrower Sole Proprietor (Income Booster) to help his son, it is comforting to see more lenders provide this proposition. As the typical age for a first-time buyer has increased, I think it is safe to assume that the age of a supporting applicant has increased. Therefore, in my opinion more innovation and flexibility is needed in looking at mortgage terms in these scenarios for better affordability.

A buoyant FTB market is vital for all of us working the mortgage market and I am proud that Skipton Building Society was able to help over 20,000 people into their first homes last year. And I look forward this year to continue to work collaboratively with distributors and brokers in tackling the issues and overcoming the hurdles that first-time buyers face.