Expectations are at a record low for potential first-time buyers, with research suggesting that 8.5 million renters in the UK now believe that they will never be able to afford their own home. This figure represents 40% of renters surveyed by Post Office Money Mortgages, which is a worryingly large percentage.
The report furthermore reveals that 2.5 million renters don't even want to own any property. The top five reasons renters gave for not owning a house were: not being able to afford the deposit (given as a reason by 30% of renters), not being able to afford mortgage repayments (16%), still saving for a deposit (13%), not wanting to own a house for other reasons (11%), and liking the freedom of being able to move at any time (6%).
Those renters that still aspire to be homeowners despite the financial hurdles believe that it will take them eight years to save enough for a deposit, with 33% even expecting to save for over a decade before they have enough. As such, aspiring first-time buyers expect to be 34 years old before they can get to their first step on the property ladder. This is however a more optimistic figure compared with 2013, when people expected to set their first step only at the age of 38. The percentage of renters who never expect to own a home is also down, from 45% in 2015 to 40% this year.
John Willcock, head of Mortgages at Post Office Money, commented on their findings: "The struggle that first time buyers face remains a huge concern and confidence among the group is low. High house prices and concerns about the cost of living have left many assuming that owning their own property is a distant dream rather than an achievable goal."
Recent news that the Help to Buy ISA cannot be used towards the initial deposit has done nothing to help boost the confidence of this group of hopefuls, with the lack of help potentially setting back their homeownership plans. As it stands, the survey showed that only 29% of prospective buyers expected to be able to raise the deposit on their own. A further 23% said they'll have to rely on help from their partner, while 17% are relying on an inheritance and 12% will call on the bank of Mum and Dad.
The Help to Buy ISA may still be useful for help with other upfront purchasing costs such as agency fees, so they should not be discarded completely. Yet many are calling on the Government to give first-time buyers more assistance. John added: "The news that the Help to Buy ISA cannot be used for an initial deposit will be a huge blow for savers and will push the goal of homeownership further out of reach. We hope Government initiatives like the Lifetime ISA will offer more of a helping hand to struggling savers."
While the Lifetime ISA will not be a viable option until next year, with a further year of saving required before people can take advantage of the Government bonus, there are other long-term savings accounts available that could still support future homeowners' dreams. It'll be anyone's guess, however, if mortgage rates will still be at record lows by the time a deposit has been saved up, and it may be too much to hope that by then, first-time buyer deals will have followed the trend of the wider mortgage market and dropped their rates as well.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
Moneyfacts.co.uk will, like most other websites, place cookies onto your computer’s
hard drive. This includes tracking cookies.