First-time buyer affordability ‘at its worst in 70 years’

Becoming a first-time buyer is the most expensive it has been for more than 70 years, according to a new report by the Building Societies Association.

The report, written by housing market analyst Neal Hudson, finds that successful first-time buyers increasingly require additional financial support from the “so-called bank of Mum and Dad” and two higher-than-average incomes.

Meanwhile, those without family help or on single and lower incomes are “stuck” in the rented sector and being excluded from home ownership.

In March 2024, a YouGov survey for the Building Societies Association (BSA) revealed that 32% of people reported they want to buy their own home but don’t think they will be able to.

The report notes that affordability is the most significant challenge facing first-time buyers, including the need for “a sizeable deposit” and the cost of mortgage repayments.

The BSA’s Property Tracker Report from March 2024 shows that the recent interest rate rises have led to the affordability of mortgage repayments being cited as the biggest challenge for potential first-time buyers.

In addition, the BSA notes that economic conditions have been lacklustre over the last 15 years, with real wages stagnating, while the forty-year period of falling global interest rates has come to an end.

The BSA, which represents building societies and accounts for a quarter of mortgage-lending, notes that two million fewer owner-occupier mortgages have been taken out since the peak in 2002.

The association is calling on the government to commission an independent review and set out a long-term strategy to increase the number of first-time buyers.

>> See also: Average age of home ownership increases as affordability worsens, ONS finds

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It is also urging government to commit to working with lenders, the housing market industry, and the public, to make homes more affordable, more available, and more appropriate to the needs of those living in them.

The BSA’s report also proposes a review of the stricter regulatory environment that has governed mortgage-lending since the 2008 financial crisis, to increase the availability of 95% loan-to-value ratio mortgages. 

Paul Broadhead, head of mortgage and housing policy at the BSA said: “Becoming a first-time buyer is possibly the most expensive it has been over at least the last 70 years, but a properly functioning housing market is dependent on first-time buyers being able to afford their first home. Whilst building societies are creating bespoke, targeted innovations within the current regulatory framework, new thinking and radical changes are needed.

Broadhead added: “There is no silver bullet to increasing first-time homebuyers and it won’t be possible to help everyone who wants to become a homeowner in the current high price-to-income housing market. But there are many things that can help to fix the broken housing market. That starts with changes to regulations and support schemes that not only help today’s first-time buyers, but don’t fail future generations.”

Meanwhile Rightmove’s House Price Index for April, published today, indicated that the average asking price of properties coming onto the market has risen by 1.1%, or £4,207, this month to £372,324, while the annual rate of price growth is now up 1.7%, the highest level for 12 months.