First time buyers have struggled to buy their first home with numbers declining for more than a decade according to the ONS.
A report from the Office of National Statistics (ONS) shows that the average number of first time buyers taking out a mortgage between 1980 and 2003 averaged 486,000 each year.
From 2002 there was a 31% decline in first time buyers which continued to fall during the financial crisis from 2007 by a further 47% to a low of 200,000 each year.
The number of first time buyers has since increased to 326,500 in 2014 but remain significantly below the normal levels.
Figures from the ONS show the number of 25 to 34 year olds that own their own home has reduced from 65% in 1991 to 45% now. Those aged 35 to 44 have also reduced from 80% to about 65% over the same time period.
The decline could be due to the fall in house building that has reduced from an average of 251,820 in 1980 to only 140,880 in 2014 forcing house prices to rise and become unaffordable for first time buyers.
Saving for a decade to buy your home
During the 1980s one in three people aged 16 to 24 could afford to buy their own home and this compares to only one in ten today.
According to Shelter, first time buyers must save for an average of a decade to build a 20% deposit to buy their first home.
First time buyers can receive help from family members as the equity release buyer can access cash using a lifetime mortgage and gift the deposit for a home to children and grandchildren.
Without family help, the only option is for remortgage buyers and home movers is to stay in their existing home and continue saving more for a bigger deposit.
A childless couple living in England in their 20s would take six-and-a-half years and in London a couple with earnings of £53,400 would take thirteen-and-a-half years to save enough for a deposit.
Shelter has said the figures are even worse if a couple have one child. In England it would take 12 years to save enough for a 20% deposit and in London, as rents and living costs are generally higher, this increases to 26 years.
With competition from buy-to-let investors and reduced supply of suitability properties, prospective home buyers must continue renting and saving for a bigger deposit.
Cost of mortgage deals is falling
The cost of mortgage deals is falling and not just for homebuyers with a large 40% deposit where the rates can be as low as 1.29% for a two year fixed rate mortgage from HSBC although the arrangement fee is a higher than average at £1,499.
Most first time buyers are looking for a fixed rate mortgage with a guaranteed monthly payment although this would cost slightly more than a variable rate mortgage.
Homebuyers with smaller deposits of 10% or even 5% are being offered competitive rates such as the Yorkshire Building Society with a 2.94% two year fixed rate mortgage and a reasonable £975 fee requiring a 15% deposit.
For remortgage buyers currently on their lenders standard variable rate, switching to a new low interest mortgage deal would help them to reduce the cost of monthly repayments.
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.
For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your property to repay an interest only mortgage, for home improvements or holidays.
Learn more by using the property value tracker chart, mortgage monthly cost calculator and equity release calculator. Start with a free mortgage quote or call us and we can take your details.
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