The housing market in the United Kingdom is currently facing the most challenging conditions for first-time buyers in 70 years. According to a report by the Building Societies Association, prospective buyers are dealing with high down payments and steep mortgage repayments, both of which are at historically high levels. This situation is making it extremely expensive for first-time buyers to enter the housing market, with many needing to come up with deposits of around £60,000 ($74,000) or even higher in London. Support from family members has become almost essential for those looking to purchase their first home.
Since the start of the century, rising house prices have made it difficult for buyers to keep up, with the average earnings in England and Wales rising only 70% since 2002 while house prices have increased by 174%. The Office for National Statistics indicates that homes were affordable until 2002 but have since become unaffordable for many potential buyers. Mortgage rates have also been on the rise, with the Bank of England increasing official interest rates to combat inflation. The average mortgage repayment has skyrocketed in recent months, making it increasingly challenging for buyers to afford homeownership.
The average rate on a two-year fixed-rate mortgage currently stands at 5.82%, down from a high of 6.85% in August last year but still significantly higher than the 2.29% rate recorded in November 2021. This increase in mortgage costs has made it difficult for first-time buyers to afford their monthly repayments, with many now paying a significant portion of their gross monthly income towards their mortgages. The BSA report highlights that these high repayments are a significant barrier to home ownership for many prospective buyers.
The current housing market conditions have made it necessary for potential buyers to have two higher-than-average incomes and support from their families to afford homeownership. This leaves single people and those without financial help from their families excluded from entering the housing market and pushes many individuals into private rented accommodation. The rental market is also facing challenges, with average rents increasing by 9.2% in the year to March – the largest annual increase since 2015. The BSA suggests that acknowledging the challenges faced by younger generations, not just in housing but more generally, should be a priority for the government.
In conclusion, the housing market in the UK is presenting significant challenges for first-time buyers, with high down payments, steep mortgage repayments, and rising house prices making it difficult for many to afford homeownership. Support from family members has become almost essential for those looking to purchase their first home, and many potential buyers are being excluded from the market. The rental market is also facing challenges, with rents increasing significantly in recent years. Addressing these challenges and creating policies to support younger generations in entering the housing market should be a priority for the government and policymakers.
