Single First-Time Buyers Struggle To Get Onto Housing Ladder

Single First-Time Buyers Struggle To Get Onto Housing Ladder
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7 November 2023 – New analysis has shown that single first-time buyers have been priced out of most areas, despite support by the government’s mortgage guarantee scheme.

There are rumours that the government is looking into helping first-time buyers get onto the property ladder. Among other measures, the government is said to consider extending the mortgage guarantee scheme.

Introduced in April 2021, the scheme aims to help first-time buyers struggling to save up for a large deposit by supporting banks and building societies offering 95% mortgages.

This means first-time buyers only have to save a 5% deposit. The scheme is due to end in December this year, but it is rumoured that the government will extend it for another 12 months.

However, new analysis by Rightmove shows that the scheme doesn’t help many single first-time buyers to afford their first home.

High House Prices Locking Out Single First-Time Buyers

According to research by the property portal, most single first-time buyers can’t afford 75% of first-time buyer properties on the market. While high mortgage rates play a part in this, high house prices are also to blame.

Rightmove used the average national salary of £34,793 provided by ONS figures for their calculations. Based on this, they say a first-time buyer would be able to borrow a maximum of £164,810.

This means 4.5 times the average salary plus a 5% deposit of £8,240. In October the average price of a typical first-time buyer property was £224,263, according to Rightmoves latest House Price Index.

So it’s not difficult to see why so many first-time buyers who want to buy alone are priced out of many areas.

With 75% of properties in the first-time buyer category above this maximum budget, even a 95% loan to value mortgage won’t be any help.

Having enough affordable homes in the right places has been an ongoing challenge. It’s clear from our analysis that people trying to buy on their own on the average salary are likely to be priced out of the majority of homes without significant financial help from elsewhere.

Tim Bannister, Director of Property Science at Rightmove

The worst place for single first-time buyers to afford their first home is London, where on an average salary they could only afford 2% of properties in their category. In the North East solo buyers are more likely to find a first home they can afford, with 67% houses within budget.

While house prices play a big part in the issue, high mortgage rates are also part of the problem.

Rightmoves analysis shows that in the current mortgage landscape a first-time buyer on an average salary would have to pay £970 per month in mortgage payments for a 95% loan to value mortgage with a 25-year term. A 35-year term would reduce the monthly payments to £850.

Record Rent Prices Add To The Problem

white outline of a house on blue background with the word "RENT" on it

Rents have risen sharply, mostly due to an increased demand and lack of supply, leading to record rent prices. Average asking rents are now 10% higher than a year ago across the country.

This means that tenants on an average salary have to pay 38% of their take-home pay for rent. For many this is a challenge in itself, especially given that we are still in a cost-of-living crisis.

But any wannabe single first-time buyer will find it very difficult under these circumstances to save up for a deposit, even a small one. One option is to buy with a partner, friend or family member.

Righmove’s analysis shows that if two people on an average salary combine their spending power, they are able to afford 70% of first-time buyer properties currently on the market in the UK, if they have a 5% deposit.

Even in London, where a single buyer could only afford 2% of properties, two buyers would be able to afford 41% of first-time buyer properties on the market.

So even if the government were to extend the mortgage guarantee scheme, it would only help a small number of first-time buyers.

Our Opinion

Rightmove’s analysis shows that the current economic landscape is a tough one for young people wanting to get onto the property ladder. The fact that single first-time buyers are only able to afford 25% of properties in the first-time buyer category is shocking.

We don’t believe that measures such as the mortgage guarantee scheme are necessarily the answer. Neither do we think that this is the right time for a stamp duty holiday, as some commentators have called for.

During the pandemic house prices have risen sharply, driven by people’s desire for more space inside and outside, as well as a shift to remote and flexible working. But the pace of the rise has been too quick and too steep to be sustainable.

A stamp duty holiday now would just artificially inflate demand, which would in turn push up prices, especially if supply issues aren’t solved.

Nationwide and Halifax have reported slight price rises in October, despite weak demand. The increase in asking prices is down to a lack of supply, which shows that this is at the heart of the issues of the property market.

In order to make buying a home affordable again for the majority of people, the fundamental issue needs to be addressed. In our opinion, this is a lack of affordable houses.

If this issue is solved, prices will come down, increasing affordability again.


  • News Desk

    Our news desk team includes a qualified architect, a freelance journalist, and a fanatical property expert who has over 12 years experience in the industry.

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