Brokers offer their perspectives
People consider the high cost of a mortgage to be the biggest obstacle when buying a property today, according to the Building Societies Association (BSA).
However, what do brokers on the ground see as the greatest barriers to homeownership and how can these obstacles be overcome? Mortgage Introducer reached out to advisers to find out.
Affordability crisis
Graham Cox (pictured left), founder at Self Employed Mortgage Hub, said the biggest barrier to homeownership is the cost of buying a property.
“It really is that simple; property prices have surged ahead of average earnings for decades, making them increasingly unaffordable,” he said.
Cox said this has not just made the mortgage payment too expensive, but pushed the minimum deposit size out of reach as well.
However, Cox said the solutions are straightforward - build far more houses, especially social housing, while putting in place other measures to prevent further runaway house price inflation.
“For example, include property prices in the 2% inflation target, speed up planning, clamp down on nimbyism, and aggressively tax property speculation as well as second homeownership,” he said.
Kylie-Ann Gatecliffe (pictured centre), director at KAG Financial, agreed with Cox that the biggest barrier is currently affordability. Gatecliffe added that as interest rates have risen, how much a client can lend in this market has tightened. This, combined with house prices still being high, Gatecliffe said, has made it tough for clients to get a property that ticks all the boxes.
“We have seen more people having to relocate, downsize or go for a different property type to make affordability work,” she said.
Now fixed rates are starting to reduce, Gatecliffe is hopeful affordability will improve and buyers will not have to make as many tricky compromises.
Overcoming hurdles to homeownership
Stephen Perkins (pictured right), managing director at Yellow Brick Mortgages, said the size of the deposit needed is a significant hurdle for many, which without help from the Bank of Mum and Dad, is difficult to save up, especially if living in rented accommodation.
“The second obstacle is affordability, which, following the increased rates and cost-of-living crisis, many lenders have reduced how much they will lend, resulting in the cost of borrowing now much higher than it has been in the last 10-plus years,” Perkins said.
The final hurdle, which Perkins believes is the root cause, is the uncontrolled upward spiralling of house prices.
“With the average house price now 10 times the average salary, many would-be home-buyers are simply priced out of the market,” he added.
Perkins said there are some lower-deposit options, such as shared ownership and affordability, that could be boosted by a family member through certain schemes, but he added there is no quick fix for the underlying problem of house prices.
While Steven Hargreaves, mortgage and protection adviser at The Mortgage Co, agreed with Perkins that there are three principal barriers to homeownership, he differed on exactly what these are.
Hargreaves said the first barrier to homeownership is the increased monthly repayments facing prospective buyers, which are accountable to the rise in interest rates over the last 12 months.
“Lenders reducing affordability and changing criteria at short notice has also played its role in preventing homeownership,” he said.
Hargreaves added that another stumbling block is the indication that property prices will fall over the next 12 months, which he said has put a considerable amount of potential buyers off purchasing a home at present.
Looking ahead, Hargreaves said the market is in desperate need of some stability, both with interest rates and lenders’ criteria.
What do you believe is the biggest barrier to homeownership? Let us know in the comment section below.
