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How the cost-of-living crisis is hitting homebuying dreams

·2-min read
First time buyers are struggling to save up (Alamy/PA)
First time buyers are struggling to save up (Alamy/PA)

As the cost-of-living crisis takes its toll on incomes and savings, around seven in 10 (72%) prospective first-time buyers say their attempts to purchase a property have been impacted, according to new research.

A third (32%) of would-be homeowners have put their property purchases on hold, anticipating delays of around 20 months, Aldermore bank found.

On average, prospective first-time buyers plan to save £43,500 for a deposit, according to the bank’s first-time buyer index.

Nearly two-thirds (64%) of first-time buyer hopefuls have had to scale back their regular savings, likely increasing the time it takes them to get on the property ladder.

And while savings plans are being put on hold, mortgage rates are climbing, following a string of Bank of England base rate hikes.

The average five-year fixed mortgage rate on offer for a borrower with a deposit as low as 5% was 4.49% at the end of August, according to financial information website Moneyfacts.co.uk. Back in early February it was 3.35%.

A typical five-year fixed mortgage rate for someone with a 10% deposit has gone up from 2.96% to 4.22% over the same period.

Around two-fifths of aspiring first-time buyers are keeping their money in current accounts, according to Aldermore (PA) (PA Archive)
Around two-fifths of aspiring first-time buyers are keeping their money in current accounts, according to Aldermore (PA) (PA Archive)

The survey of 2,000 prospective first-time buyers from Aldermore also found that around two-fifths (44%) are keeping their savings in current accounts.

Some of those surveyed also said they are relying on cryptocurrency to generate deposit funds, despite its considerable volatility.

Aspiring homeowners aged 18 or over but under 40 may be able to boost their savings by opening a Lifetime Isa.

They can put in up to £4,000 each year. The UK Government will add a 25% bonus onto money saved, up to a maximum of £1,000 per year.

Withdrawal charges on Lifetime Isas may apply though, if you need to take money out for reasons other than buying a home, depending on the circumstances.

As well as scaling back their savings, some buyers are looking for a cheaper home than than their original price point.

Jon Cooper, head of mortgage distribution at Aldermore says: “While saving in this current economic climate may feel like a long and arduous journey, we’ve found that the majority of determined first-time buyers think the difficulties are ultimately worth it, in order to get on the property ladder.

“It’s important that prospective buyers are aware of the support available to them. Would-be buyers should consider seeking advice from a broker who can lend a helping hand and guide you through the process of becoming a homeowner.”