The Current Struggle for First-Time Home buyers: A Tough Market Report
According to a recent report by the Building Societies Association (BSA), first-time buyers are facing their hardest challenge in 70 years when it comes to purchasing a home. Let’s break down what this means and what potential solutions might be.
High Hurdles for First-Timers
The report highlights that many first-time buyers are finding it increasingly difficult to afford a home without either significant parental support or having two high incomes. With soaring property prices and relatively high mortgage rates compared to previous years, getting onto the property ladder has become a considerable challenge.
The Rental Predicament
For those unable to buy, renting from private landlords has become the only option. Unfortunately, the cost of renting has also seen a significant increase, further complicating matters for those looking to save for a deposit.
What’s Behind the Struggle?
A key factor contributing to this struggle is the affordability gap between house prices and earnings. While wages have seen modest growth, house prices have soared, making it increasingly difficult for first-time buyers to save for a deposit and meet mortgage payments.
Proposed Solutions
The BSA suggests that the housing market needs to undergo significant changes to make home ownership more accessible. One suggestion is to introduce more flexibility in regulations, particularly regarding lending limits for borrowers with small deposits.
Government Intervention
The BSA recommends that whichever government comes into power after the next general election should commission a thorough review of the first-time buyer market. This review should explore all possible avenues to make home ownership a reality for more people.
What Can First-Time Buyers Do?
While the market poses challenges, there are steps first-time buyers can take to make home ownership more feasible:
- Consider Over payments: If you’re currently on a low fixed-rate deal, making over payments now can save you money in the long run.
- Explore Interest-Only Mortgages: While it won’t reduce your debt, switching to an interest-only mortgage can lower your monthly payments, providing short-term relief.
- Extend Your Mortgage Term: Opting for a longer mortgage term, such as 30 or 40 years, can reduce your monthly payments, making home ownership more manageable.
The current housing market presents significant hurdles for first-time buyers, but with careful planning and potential policy changes, there may be hope for a more accessible path to home ownership in the future.