A “comprehensive review” of the mortgage market has been announced by Prime Minister Boris Johnson, in a bid to help people onto the property ladder.
Here is a look at some of the challenges facing first-time buyers:
– What has been happening in the housing market lately?
Demand has been outweighing supply – a trend which has continued even after a stamp duty holiday ended last year and the cost-of-living crisis has been tightening its grip this year. This imbalance has been pushing up prices.
Across the whole of the market, the average UK house price hit a record high of £289,099 in May, according to Halifax.
– What impact have soaring prices had on first-time buyers?
First-time buyer house prices have been increasing by £24 per day on average, recent analysis by Direct Line Home Insurance found.
A typical first-time buyer property is worth roughly seven times the average salary of someone aged in their 30s, compared with six times in 2016, Direct Line said.
Halifax has said it typically costs around £10,000 more to buy a flat – the property type often favoured by first-time buyers – than it would have done a year ago.
– What about mortgage costs?
A string of interest hikes has had an impact on the mortgages being offered to first-time buyers.
The average two-year fixed mortgage rate back in December 2021 for someone with a 5% deposit was 3.09%, according to Moneyfacts.co.uk. Now, it is 3.46%.
For someone with a £200,000 mortgage being paid back over 25 years, this would mean paying around £39 more per month than if they had taken out a two-year fixed-rate six months ago.
Over the two-year period of the mortgage, this adds up to paying around £940 more.
– How many first-time buyers have been getting on the property ladder recently?
According to trade association UK Finance, 86,500 first-time buyers got on the property ladder with a mortgage in the first quarter of 2022.
This was down from 91,850 in the previous quarter.
– What is the typical first-time buyer profile?
On average, first-time buyers put down a deposit of around 20% and have mortgage terms lasting around 29 years, according to UK Finance data.
Across the UK, the average person buying their first home is aged 31.
– Any signs of a market cooldown?
There are signs that the house purchase market is cooling and that the rate of price growth, while still high, is weakening slightly.
More sellers are also offering discounts, with around one in 20 properties having price reductions of 5% or more, according to Zoopla.
The Royal Institution of Chartered Surveyors (Rics) has said demand from prospective home buyers fell in May, in what could be a side-effect of living costs and higher interest rates.
But Rics also highlighted the strength of the rental market and the challenges for tenants in competing for rental properties. Rising rents could make life harder for renters saving for a deposit to buy a home.