New research by the Resolution Foundation finds the average first time buyer takes 24 years to save enough deposit to buy their home.
A new study by the Resolution Foundation shows that for low to middle income first time buyers saving 5% of their disposable income it will take 24 years before they have a large enough deposit to get on the property ladder.
This has increased dramatically since the 1990s when it only took three years despite mortgage interest rates at an all time low.
The Foundation report also shows that the property ownership rate has now reduced from 73% in 2007 to 63% today.
Homeownership market is distorted
Resolution has said the rising cost of homeownership in the UK is distorting the generational divide.
The baby-boomer generation has benefited from the accumulated equity and the younger generation is struggling with income to secure a mortgage.
For older remortgage buyers the higher prices gives them the opportunity to release cash which they can use to improve their home and further increase the value.
The study shows 46% of non-homeowners think they will be able to buy in the future and for those on the lowest incomes this increases to 57%. For the richest non-homeowners this figure reduces to 25%.
The main reasons non-homeowners think they cannot buy a home are the high initial cost, the mortgage affordability and difficulty finding a property.
In addition there has been a decline in the number of new buyers as the proportion of households buying with a mortgage is 38% reducing from 47% in 2007.
With reduced supply of suitable properties and more competition, home movers may delay upsizing and remain in their existing home.
There may be fewer suitable homes on the market as the equity release buyer can avoid downsizing and agree a lifetime mortgage to access money from their home.
New schemes make matters worse
According to Matt Whittaker, chief economist at Resolution, new government schemes have increased demand for property and push house prices higher.
The Help-to-Buy scheme makes it easier for first time buyers to take their first steps on the property ladder. In the Autumn statement the Chancellor George Osborne introduced new stamp duty of 3% on buy-to-let landlords which could increase demand in the short term.
These actions only serve to make home ownership less attainable for many while increasing the gains for older homeowners.
Mr Whittaker has said increasing housing supply offers more potential for dealing with the aspirations of first time buyers. To this end the government’s plan to double the housing budget and build 400,000 new homes is a welcomed step.
What are your next steps?
Call our LCM mortgage brokers for advice if you are a first time buyer, want to remortgage your existing home for the best mortgage deal, moving home or are a buy-to-let investor.
Learn more by using the property value tracker chart, mortgage cost calculator and equity release mortgage calculator. Start with a free mortgage quote or call us and we can take your details.
For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your property for home improvements, holidays or even give to a family member.
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