There is something inherently British about aspiring to own your own home. Or, at least there used to be.
With house prices soaring since the turn of the century, it is becoming increasingly harder to get onto the property ladder. In January 2000, the average price for a property in England was £75,219, according to government data.
By January 2019, it had more than trebled to £225,657 and only 65% of households were homeowners, compared to 71% in 2003.
So why do we remain obsessed with owning our own home? Well, with the average cost of renting increasing to £1,276 per month in February of this year, according to the Office for National Statistics (ONS) it is arguably cheaper for a start. Other than the flexibility and freedom, there are very few benefits to renting.
Whilst it may be your home, it will never be your asset and the only equity you build is that of your landlord. Also, owning your own home provides you with a sense of security that can’t be achieved by renting, not to mention the control you have to change or extend your property.
How do first-time buyers make their move?
The question, of course is the ‘how?’. Knowing how much you can afford and raising a sufficient deposit are two of the biggest factors to home ownership and continue to be the most challenging, particularly for new borrowers.
For some, the Help to Buy Equity Loan Scheme, which was abolished in March of last year, addressed both issues and has certainly left a gap in the property market. With no real replacement, the ‘Bank of Mum and Dad’, an expression very quickly slipping into our vocabulary, is more often than not stepping in. A report by the HOA suggests 54% of existing homeowners expect to be required to assist their children in buying a home at some point in the future,
Opportunities for first-time buyers
Somewhat depressingly, it was recently reported that becoming a first-time buyer is possibly the most expensive it has been over the last 70 years. Despite inflation falling, the higher interest rate environment continues to be a challenge, particularly in relation to mortgage affordability.
That hasn’t, it would seem, deterred some first-time buyers, who are currently propping up the property market, with 29% of homes in the UK purchased by this type of borrower in 2023, according to a report by Hamptons.
Lender innovation has also improved significantly over the last two years, with more inventive lending criteria available to accommodate new borrowers. Builders, developers, and lenders are also working closely together and there are currently a variety of different affordable housing schemes available to support the New Build market.
At TSB, we’re playing our part too. All our first-time buyer products now revert to a follow-on Bank of England Base Rate Tracker product lower than our current Homeowner Variable Rate.
Not only does this reduce the total amount payable over the lifetime of the mortgage, but it also provides first-time buyers with additional assistance from a mortgage affordability perspective, helping them onto the property ladder.
So, to buy, or not to buy? That’s the question!
Paul Dignan is national account manager at TSB
