Max Turner, who leads the new homes team at Savills in Suffolk, discusses how those looking to get on the housing ladder are adjusting their priorities.
Recent headlines have been dominated by the rise in mortgage rates – with first-time buyers (FTBs) considered especially vulnerable as they face significant hikes in the cost of borrowing.
When compared to August last year, FTBs are now buying homes that are 5% cheaper, but they are also using 6% more of their income on interest payments and the average deposit is up 9.6%.
Making allowances in order to save for your first home is nothing new. But affordability issues continue to force many FTBs to make significant compromises.
What changes are first-time buyers making?
In response to the average house price increasing from 6.8 times the average salary to 8.2 times between 2010 and 2023, buyers are now waiting longer to purchase their first property.
The average FTB age has increased from just under 31 to just over 33. FTBs have also had to increase the length of their mortgage term from just under 27 years to almost 31.
Aspiring home buyers are also relying on living with family members for longer. The 2021 Census data showed a substantial increase (14.7%) in the number of non-dependent children living at home since 2011.
Areas with the highest affordability pressures in London and the South East witnessed the biggest increases in boomerang children. Although some of this rise is probably due to younger
people returning home during the pandemic, delaying domestic independence has helped many home buyers avoid high rents eating into savings for a deposit.
There has also been an increasingly large role for the ‘Bank of Mum and Dad’. In total, 170,000 first-time buyers had family assistance in getting their mortgage in 2022, accounting for around 46% of all mortgaged first-time buyers. This number is expected to jump to 61% this year.
How far can people adapt?
A combination of strategies helps FTBs overcome affordability issues caused by rising house prices and mortgage costs.
Everybody will have different levels of flexibility and their own limits, requiring a constantly changing set of new compromises.
Affordability pressures also emphasise the continued need to build many more new and affordable homes for first-time buyers, particularly as Help to Buy has come to an end.
Shared Ownership remains a popular alternative, while the Government’s First Homes scheme – which sees homes sold to FTBs at a discounted rate – is now up and running.
Whatever the solution, it is clear that there is no end in sight for FTBs having to make lifestyle changes in order to get a foot onto the housing ladder.
For advice on the new homes market in Suffolk contact Max Turner at Savills on 01473 234826 or email MTurner@savills.com
