Fewer younger people are buying their own homes – experts debate possible solutions
To some they are the avocado on toast-eating, artisan coffee-guzzling generation, but to others they are the victims of an unforgiving economy, who will face huge challenges to get on to the property ladder - if ever.
Certainly, a younger generation of prospective first-time buyers believe they cannot purchase a home as easily as their parents did before them. They’re staying in the family nest longer and buying later – the average age of owning their first property was 34 in 2022-23, according to Uswitch, the price comparison and switching website.
New data from the Financial Conduct Authority reveals that the number of people between the ages of 18 and 30 securing a mortgage each year rose relatively steadily over the past decade, from 252,558 in 2014 to 350,092 in 2023.
The introduction of stamp duty relief during the pandemic saw a spike in the number of young homeowners - reaching 401,665 in 2021. That relief is still in place for first-time buyers – they’re exempt from paying stamp duty on a property up to the value of £425,000, and will pay 5% on the portion between £425,000 and £625,000. But, worryingly, the number of young people buying has been trending downwards – a 13% fall in the two years between 2021 and 2023.
The wealth adviser Quilter, which sought the information from the FCA, points out that mortgage rates and house prices are now much higher than they were a decade ago, which has piled pressure on affordability.
Charlotte Nixon (pictured left), proposition & distribution director at Quilter’s mortgage network, commented: “The dawn of a new government provides the perfect opportunity to reassess the options currently available, as well as to invest time into consulting and planning to ensure that any new schemes brought to the table are as effective as possible.”
What are the issues faced by young people wanting to buy their own home?
Industry commentor Lisa Parker, from mortgage broker L&C Mortgages, believes stubbornly high house prices and the difficulty of saving for a deposit continue to challenge first-time buyers.
“A period of high interest rates over the last two years will almost certainly have led to some buyers putting off their first purchase,” reasoned Parker (pictured second from left), “but the recent cut to the Bank of England base rate is encouraging, and predictions for further cuts have already resulted in lenders cutting mortgage rates, which will help with affordability.”
For Serena Smith, mortgage & protection specialist at Mortgages with Serena, 90% of her clients fall into this demographic – but she takes a harder line.
“I have to say that I feel there is a large influence on them via social media not to give up coffee, holidays, iPhones, and compare everything to the 80s, even though Starbucks didn’t exist back then,” observed Smith (pictured second from right).
“A holiday consisted of a week in a caravan, not bi-monthly trips to O Beach in Ibiza, and mobile phones were only for the elite business man - now everyone carries a £1,000 device in their pocket. My clients, who have been successful, accept that sacrifices must be made to ‘enjoy your mortgage at the weekend’ - another social media trend.
“For those willing to, they can and do achieve homeownership. It all depends what’s important to the 18-30-year-old - living at home and being able to live a 18-30s lifestyle, or wanting to have their own place to call home.”
According to Richard Campo, the cost-of-living, the impact of COVID on school and university leavers, and a lack of high skilled and high pay jobs for them are contributory factors, but he believes there is a far more endemic problem.
“The UK population has increased by around 3.7 million in the last 10 years - a 6.8% increase,” said Campo (pictured right), head of growth at Heron Financial. “We have only built 1.4m homes in the same timeframe, according to the NHBC (National House Building Council). Simple market dynamics of supply and demand will really be felt by younger, and typically lower earners, trying to buy.
“We need to build more homes, and specifically, more affordable homes. The government should be doing this, as a joint venture with developers, to renovate brownfield sites. I am at a complete loss why that hasn’t happened yet. The planning rules and ‘nimbyism’ is undoubtedly a factor, but that has to change.”
Read more: First-time buyers move to unfamiliar neighbourhoods to get on the property ladder
How important is government support for first-time buyers?
Michelle Lawson, mortgage adviser and director at Lawson Financial, seems less convinced that government intervention is the way forward.
“Government initiatives will always support just a small percentage of buyers,” Lawson said. “Don’t forget this perfect storm has largely been caused by the previous government, with the Liz Truss economic disaster and the constant onslaught to landlords.”
But she added, more optimistically: “With mortgage rates starting to fall, and lenders reducing their standard variable rates as a result, we should start to see affordability easing.”
The mortgage guarantee scheme, introduced by a Tory government in April 2021 – in which it offered lenders the option to purchase a guarantee on mortgage loans where the borrower had a deposit of less than 10% - supported the completion of 44,368 mortgages over a three-year period. Of these, 86% were purchases by first-time buyers.
“The low take-up of the mortgage guarantee scheme shows that it still doesn’t hit the mark in the current climate,” said John Phillips, CEO of broker Just Mortgages and Spicerhaart estate agents. “High inflation and living costs have simply eroded the ability of many to save for a deposit.
“I’ve long advocated for the return of Help to Buy. There’s no questioning its ability in getting people on to the housing ladder. Let’s not forget the £2 billion profit the scheme generated for the Treasury. We are seeing the appointments being booked in and see the appetite - it all comes down to ability.”
