Are you a prospective first-time buyer? Are you finding it tough to find a house you can afford? If so, you're not alone. According to a new report from Shelter, many first-time buyers (FTBs) are finding themselves locked out of the housing market because of affordability issues, with many being placed under increasing financial pressure in order to buy their own homes.
The research analysed homes listed on property listings website Zoopla across England. It found that just 16.9% of homes (a mere 42,185 listed) were affordable and suitable for families earning the median income of £30,748 a year, a figure that dropped markedly to just 7.5% for a single person looking to buy a home.
For couples without children the picture is slightly better – 32.3% of the market is priced affordably in this case – but for those searching in London, just 0.01% of homes were listed at an affordable price for FTBs. In fact, in 35 local authority areas, mainly those in London and the South East, there were no suitable homes available whatsoever.
As a result, union UNISON is calling on the Government to provide more help with homeownership, and notably, it's calling for stamp duty to be abolished for FTBs. "Housing affordability remains a major problem for many people, particularly first-time buyers, looking for a home to buy," says UNISON's Sylvia Jones. "The housing affordability crisis has been compounded by the lack of social housing and finance for home ownership, and the crisis requires a wide range of solutions to tackle it.
"Crucially, what is desperately needed is a significant increase in the supply of all types of housing over the next 30 years. This would widen the housing options of people and lower the costs of housing overall for everyone – making more housing available, accessible and affordable."
This follows research from Your Move and Reeds Rains, which found that there was a sharp fall in first-time buyer transactions during the first three months of the year, with just 60,900 sales being recorded. This compares with 79,900 during the previous three-month period, and marks the lowest quarterly total seen in two years.
These lower volumes come despite the fact that typical mortgage rates for FTBs have fallen to a five-year low (3.64%), and thanks to borrowers seeking higher loan-to-value mortgages, typical deposits have fallen, too. In fact, the average deposit now stands at £24,872 (-9.4% on a quarterly basis), representing 64.6% of a typical first-time buyer's annual income, down from 69% the previous quarter (-6.4%).
Mortgage payments are also taking up a smaller proportion of typical income, with 19.9% of gross earnings being spent on repayments in March, down from 20.1% in February, and an even steeper drop from the 21.9% recorded in March 2014. From these areas, it looks as though affordability should be less of a concern, hinting that the drop in FTB transactions could have deeper roots.
"Cheaper mortgages and a steadier property market should be boosting first-time buyers," said Adrian Gill, director of Your Move and Reeds Rains. "It's a great time to get on the ladder according to these headline fundamentals, yet for many thousands of would-be new buyers, there is still a very real difficulty in matching their personal finances to a home they can afford.
"Some might also point to election uncertainty and that could be a partial brake, [but] the real bottle-neck is a much more serious and longer-term problem: a lack of new homes is catching up with the property market."
This shortage is serving to increase house prices – the average price paid by a first-time buyer rose to £152,681 this quarter, up from £149,836 at the end of last year – and even though wages are beating inflation to help boost household finances, it isn't enough. "Property prices are still rising faster," explained Gill, and "as long as prices keep rising faster than wages, the fundamentals will keep being squeezed, and buying a home will need ever more artificial support."
Given these figures, trying to get on the ladder may seem like a tricky business, but you don't have to stay locked out forever. The key to having a comfortable affordability profile is to be prepared, and if you're committed to saving as much as you can and are able to devote sufficient time to it, there's no reason why you won't be able to build a suitable deposit to take that first step.
You'll need to carefully go through your budget so you can make the necessary adjustments – lenders will analyse your outgoings with a fine tooth comb to ensure you can afford a mortgage, so make sure you're ahead of the game. Check out property listings from an early stage to get an idea of the type of home you can afford (and how much of a deposit you'll need to save), and do sufficient research into first-time buyer mortgages to estimate your future repayments so you can be confident about being able to afford them. It may take a bit of time, but hopefully, you'll soon be able to find a home you can afford.
Read our FTB guide to getting on the housing ladder
Compare savings accounts to build up that deposit
Use our mortgage calculator to compare repayments
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