Historically High Down Payments and Steep Mortgage Repayments Pose Major Challenge for First-Time Buyers in UK, Report Finds

British individuals looking to purchase their initial home are facing the most challenging circumstances for property ownership in around 70 years according to a report published recently by Building Societies Association, which represents nearly a quarter of all mortgage lending in the UK. The study highlights that first-time buyers now have to grapple with both historically high down payments and steep mortgage repayments unlike previous generations who faced either one or the other at different times.
The report further states that becoming a first-time buyer is currently expensive, perhaps more so than any time in over 70 years since people have to spend close to £60k ($74,519) on average as down payments and up to £144k ($188,239) for properties in London where family support appears almost essential. The study also mentions that during certain periods, the costs of both buying (downpayments) and owning a house via mortgage repayment were high.
This struggle can be attributed to increasing property prices since 2002 when average earnings rose by around 70% in England & Wales while housing prices increased drastically at almost double that rate, reaching an astronomical rise of over 174%. Since the beginning of this century, would-be buyers have struggled with surging house costs.
The report also highlights how rising mortgage rates pushed repayments up considerably until recent levels matching pre financial crisis time in spite of Bond Trader concerns resulting from Liz Truss’s disastrous ‘mini budget’. The average rate on a two year fixed rate mortgage currently stands at 5.82% according to data by Moneyfacts, which is lower than the peak recorded last August but still far above November 2021 when rates stood at around 2.3%.
This scenario makes it harder for potential home buyers in spite of lower inflation triggered central bank actions causing borrowing costs higher after Prime Minister Liz Truss’s failed ‘mini budget’. The BSA report also points out how mortgage repayment surges now appear as a substantial impediment towards housing aspirations with younger generations. This obstacle necessitates having two more-than average income earners and parental support to make home ownership possible for many, excluding single individuals or those without financial help from their families in the process.
The report further suggests that this situation has also caused numerous prospective buyers ‘to stay put’ amid escalating rentals: Recent figures published by ONS reveal an average rental hike of 9.2% over a year which is reportedly highest since records began five years ago, causing more individuals to remain in private-rented accommodation rather than buying homes due to the high costs involved.
The BSA report concludes that younger generations are facing housing challenges as well as other issues related mainly around rental availability leading potential house purchasers out into unaffordable houses forcing an election is scheduled within a year, and a new government committed towards helping prospective first-time buyers should address the present circumstances in home buying with a sincere intention to ease financial pressures.