Cost of living forces 70% of FTBs to give up on homeownership
With shop prices increasing at the fastest rate in a decade, energy costs at an all-time high, and the general cost of living accelerating to eye-watering levels, saving for a deposit on top of all this is proving too much for prospective first-time buyers.
New research from Nationwide Building Society shows the scale of the crisis amongst UK FTBs, with 70% of people looking to buy their first home in the next 12 to 24 months delaying purchases as the rising cost of living impacts their ability to save towards a deposit.
According to the data, on average, prospective first-time buyers say they will delay buying a home for nearly two years, with 19% saying they are pressing pause on their homeownership aspirations for more than three years. The South-West (23%) and Wales (28%) are the areas where potential homeowners are most likely to delay that purchase for more than three years.
The poll of more than 2,000 people who are looking to buy their first home within the next five years reveals a deposit is the biggest hurdle, with 28 per cent claiming it is the most difficult part of homeownership to overcome. Indeed, a 10% deposit on a typical first-time buyer home is nearly 60% of gross annual income – a record high.
By contrast, just 14% say it’s the ability to borrow enough and 12% believe keeping up with mortgage payments to be the main challenge.
Nationwide’s research shows that 88% have had their ability to save for a deposit impacted due to the rising cost of living. This rises to 93% for Scotland, 98% for Wales and 98% for Northern Ireland. Even the lowest UK region - Greater London - records 82%.
That has led to close to half of those impacted (48%) reducing the amount they save towards their deposit, with more than a third (38%) using the money already earmarked as a deposit to pay towards other bills.
When asked whether 2022 is a good time to buy their first home, those starting out are very much split - 51% disagree while 49% agree.
Of the main problems noted by people about buying a home in the area they live in, 57% said it was high house prices, while 43 per cent said rents were too high to be able to save. 24% said their area had a competitive housing market, while the same amount (24%) said there was a lack of homes on the market.
The current pressure on finances is making people consider moving to other areas, according to the poll. 69% are willing to relocate to another part of the UK in order to get more for their money, with 65% willing to do so in order to get a bigger property. This is highest for those living in Greater London (79%), where prices are the highest in the UK by some margin.
The ways would-be first-time buyers are cutting costs to try and get that first home include:
47% reducing everyday spending
43% cutting back on going out or eating out
37% lowering household bills by shopping around
36% selling things they own
35% cancelling unused subscriptions
23% saving into an account rewarding homebuyers (e.g. Lifetime ISA, Help to Buy ISA)
21% benefiting from cashback from spending on a card
20% using a savings or budgeting app
17% taking an additional job
12% putting off starting a family or adding to it
According to the poll, the average age prospective first-time buyers hope to buy their first home is 27. However, 30% say it is unlikely they will be able to purchase a home by the age they hoped, with 33% admitting they’ve already gone past that age.
The struggle to get onto the property ladder is also driving people to think about buying with someone else to help make that first home purchase a reality. 65% believe they need to have someone else alongside them, such as a friend, family member or partner, to be able to afford to own a property and that figure is mirrored in reality with 66% admitting they were planning to buy with a partner or spouse – only 24% said they were going to buy alone.
The deposit:
The average amount saved by prospective first-time buyers towards their home is £14,700 – with men having saved more (£17,028) than women (£13,394). This peaks at £21,071 for Greater London, and is lowest in Northern Ireland, at £7,065 – around three times less. While nearly a quarter (23%) have saved £20,000 or more, just over a third (37%) have managed to save £5,000 or less.
To get there, people have been saving for around three to three and a half years on average. In fact, 86% of prospective first-time buyers have been saving for their deposit for at least three years, with 14% saving for six or more years. Those in London saving for the longest, at around three and half years. Those in Northern Ireland have been saving the least time, at a shade over two and a half years.
75% saved their deposit themselves while 26% relied on their partner. 23% received the money from a parent or grandparent – either through the money being gifted or through them releasing equity from their properties, while 13% received the money as an inheritance.