First-time buyer doubts dampening spirits as two-fifths believe they won’t achieve their homeowning dreams

Financial News

Almost half (48%) of people aged between 25 and 34 today who aren’t on the property ladder say they want to own their own home within the next 10 years.

However, 41% think that achieving this dream is impossible.

What are 25-34-year old’s expectations?

Research from the Building Societies Association(BSA) shows that the number of people aged 25-34 who own their own home has dropped from 40% to 33% over the past 10 years.

Looking forward, the research shows that 62% would like to own a home within the next decade, with just 9% expecting to continue living in rented accommodation in 2028 by choice.

Just 9% of current 25-34-year olds are aiming to continue living in rented accommodation in 2028, this figure was at 31% in 2008.

What’s stopping young adults from reaching their homeowning goal?

There are a range of obstacles for first-time buyers to overcome, including:

  • Saving a deposit: More than three quarters (76%) of potential first-time buyers are struggling to raise enough money for a deposit.
  • Accessing a mortgage: Almost half (46%) of young adults report that they are struggling to find a mortgage which suits their needs; whether that means providing enough money to buy their ideal home or being approved for a mortgage in the first place.
  • Affording mortgage repayments: Although figures from Santander have shown that the mortgage repayments are more affordable than renting in all regions of the UK, it is wise to consider how you will make those repayments, before committing to them. This is an issue which affects 43% of young adults looking to buy a home.
  • Job security: While mortgage repayments may be affordable under your current circumstances, what happens if you are suddenly made redundant or are unable to work for a period of time? For just under a third of potential first-time buyers, job security is a concern which is delaying the homebuying process.
  • Property market worries: 18% of 25-34-year olds who are thinking about buying a home are worried about house prices falling in the future. This could affect their ability to buy future properties and to accommodate their needs in the next phase of life.
  • Stamp Duty: 15% are worried about the cost of Stamp Duty on their first property. However, new rules introduced during the 2017 Autumn Budget mean that, relief is available on first homes costing less than £300,000, while further relief is available on homes costing up to £500,000 in more expensive areas, such as London.
  • Finding the right property: Just 12% of potential first-time buyers are held back by an inability to find a property which meets their needs.
  • The homebuying process: Approximately one in 10 (11%) of young adults are putting off buying their first home due to the complexity of the process itself. However, this is not necessary, as there are plenty of resources and professionals available to make it as hassle and stress-free as possible.

Is it a lost cause?

With such an extensive list of reasons behind the decline in first-time buyer positivity, you could be forgiven for thinking that buying your first home simply isn’t worth it. However, the benefits of owning your own home far outweigh the difficulties you might face on the path to homeownership.

In fact, there are three key things to focus on, which will make it easier to get onto the property ladder as a first-time buyer:

1. Focus on your deposit

The most demanding part of the homebuying process is likely to be building your deposit. This will include determining how much you need to save, then finding the best place to keep your savings. It is likely that your first port of call will be a Lifetime ISA. This is a tax-efficient account into which you can deposit up to £4,000 per year. Each year, you will receive a bonus equal to 25% of your deposits over the previous tax year, which is effectively free money.

Lifetime ISAs can be opened by anyone aged 18 – 39, and you can continue making deposits until your 50th birthday. You will not attract any penalties if you make a withdrawal to pay the deposit on your first home, or to use as retirement income once you reach the age of 60. Taking money out of the account for any other reason will be subject to a 25% penalty.

2. Improve and maintain your credit score

Your credit score and record are the key to accessing credit, and the interest rates you are offered will depend on your financial history. Therefore, before applying for a mortgage, it is important to work on making sure that your credit score is a high as possible and that your credit record is clean and appealing to potential lenders.

There are four things you can do to improve your credit score:

  1. Check your credit score and report using one of the trusted credit checkers. If you see anything you are unsure of, query it with the company and make sure to report any errors or accounts which should not be on your record.
  2. Keep your information up to date. Make sure that your credit report shows the correct details for you, including your accounts, their statuses and your contact details.
  3. Make sure you are on the electoral register. This is one of the simplest ways to boost your credit score. If you move house, be sure to update your details to keep your record up to date.
  4. Make sure monthly repayments on credit cards are paid in full and on time. If you are having trouble getting on top of your finances, you may need to seek help from a debt specialist. Further information can be found on the Step Change

3. Consider talking to a professional

As independent financial advisers, we work with a whole-of-market approach. That means that we aren’t bound to specific providers and can make sure that you get the best solution to meet your needs and circumstances.

Whatever you feel is holding you back from getting onto the housing ladder, we’re sure to have seen it before. We have years of experience, knowledge and qualifications which we can use to support you in your financial decisions.

If you are planning to enter the property market soon but feel like you may need some additional guidance to bring your finances in line and ensure that everything is in place before making the leap, feel free to get in touch with Sarah or Bev on 0115 933 8433.