When assessing the state of the mortgage market, first time buyer activity has often been the centre point of studies in recent times. Many market insiders feel that the sector as a whole has seen vast improvements in activity over the past year, but the issues facing the first time buyer market remain a quandary that increasingly appears insurmountable.     

The Office for National Statistics released a report yesterday confirming these fears, pointing to a significant decline in the purchasing of property amongst the under 30’s in the UK over the past 20 years as a clear indicator that buying that first home for many younger people is becoming a distant dream. Considering the timeframe under the spotlight, it is noteworthy that from the 80’s to the 90’s one in every three 16-24 year olds were able to secure their first property, compared to one in ten today.

Statistics from the report lay bare the stark reality for young families, as it highlighted that 65% of 25-34 year olds were able to purchase their first property in 1991, but by 2012 the figure sharply decreased to 45%. Particularly concerning was the reduction in purchases amongst the 35-40 demographic, with a drop across the same period from 80% to 65%.  

ONS data suggests that the mid-80’s was a highpoint for first time buyers, with 600,000 under 30’s buying their first home during this period. While the onset of the financial crisis brought about a wholesale reduction in activity for the mortgage market, it is significant that from 2008 to 2010, the level of buyers from the same age range reduced by two thirds to 200,000.

The proliferation of buy to let landlords has often been cited as a reason for the change in first time buyer fortunes, as the rises in rental incomes bring forth the challenge to save for the purchase of a home. The sharp increase in activity in this area over the past decade has coincided more recently with an unexpected spike in property prices. The ONS data notes that the average increase year on year since the 1980’s is 6.9%, even though at the high point of the financial crisis property values tumbled for several consecutive years.

Saving for a deposit formed the crux of the reasons for first time buyers struggling, according to the ONS report. The report states: “For first-time buyers, the average deposit as a percentage of purchase price increased by almost 10 percentage points between 1988 and 2013, standing at 22% of the price of the house.

“Deposits for first-time buyers peaked during the economic downturn in 2009 at 28% of the purchase price. Since 2009, deposits for first-time buyers have steadily fallen – though figures remain among the highest for the last 25 years.”

While the Government have attempted to tackle the issue by introducing the Help to Buy schemes one and two, the limitations involved in either variation, coupled with the increase in tougher underwriting requirements, has meant that buyers utilising these options have been limited to sections of the UK where house prices are significantly lower than the highest levels noted in London and the South-East.

Acknowledging the political undercurrent that the housing issue presents, the ONS report confirms that the issue is likely to be a major part of the upcoming election: “House prices have been increasing, and first-time buyers are finding it more difficult to get on the property ladder – while home ownership among younger age groups generally has declined.

“If the number of households in England grows to 24.3 million in 2021 as projected, this would be equivalent to an additional 221,000 households per year. Housing is therefore likely to remain an important topic in the future.”

Article By: Simon Butler, Senior Mortgage Consultant at Contractor Mortgages Made Easy

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