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First time buyers navigating the affordability gap
As the election approaches, just what help is needed for first time buyers and families? The event itself was certainly not unexpected and the market, including the lending community is well prepared for it.
This is especially the case for a first-time buyer market which is likely to continue facing its fair share of obstacles from an affordability perspective and when it comes to saving a substantial deposit. Especially when compared to previous generations.
Research from My Home Move Conveyancing shows that, even after adjusting for inflation, the cost of getting on the current property ladder is 191% higher for the average first-time buyer when compared what their parents would have paid in the 1990s.
Over the decades, changes in house prices and salaries mean that properties have become less affordable. Now, in the 2020s, an average house price of £280,660 and an average annual salary of £34,637 means that the price of a home is 8.1 times the average earnings - more than twice as much as in the 1990s.
This data helps highlight just how much support FTBs are requiring from family members to bridge this gap. Education also remains a key component within this complex equation. According to additional research commissioned by Barratt Developments PLC, one in five (20%) first-time buyers aren’t aware of affordable homeownership schemes but, since the general election announcement, Google searches for ‘first-time buyer schemes’ and ‘first-time buyer ISA’ are reported to have increased by 5,000% and 70% respectively.
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The UK mortgage market is home to a huge array of product types. Of course, choice and options are a real positive in helping to successfully navigate ever-shifting market dynamics and borrowing requirements.
For example, we have recently entered the Joint Borrower Sole Proprietor (JBSP) product arena which allows a wide range of family members to use their incomes to bolster the borrowing potential of the main applicants without needing to be named on the property deeds.
Brokers know that such a product exists, how it works, the merits and pitfalls but how many potential FTBs are aware of it? Or how many existing clients who are at the latter end of their borrowing cycle and looking to help family members onto the ladder realise that this may be an option?
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We have now entered a period where there is an even more pronounced emphasis on the advice process and an opportunity for the intermediary market to provide greater clarity, accessibility and expertise to those FTBs who remain clouded in ambiguity. And that is saying something given what an integral role the intermediary community has already played for a rising proportion of borrowers, especially over the past 18 months.
*This article was originally published on Best Advice
References:
https://myhomemoveconveyancing.co.uk/buyers
/what-can-you-afford/first-time-buyers-are-paying-more-than-their-parents/
https://www.financialreporter.co.uk/
first-time-buyers-still-dont-know-enough-about-homeownership-schemes.html
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