In today’s volatile economic landscape, saving money has become a real challenge. For many at the moment, that means having to make extraordinarily tough decisions about putting something away for a rainy day versus the basics costs of living day-to-day. But it also has a knock-on impact on people’s aspirations for homeownership.
We all know that saving is the important first step towards getting a mortgage, but for many, the sheer cost of getting onto that first rung of the housing ladder is a daunting, if not seemingly impossible, prospect.
Rising property prices, stagnant wages, and the rising cost of living are creating substantial barriers for aspiring homeowners.
The savings picture
In the wake of ‘Savings Week’ last year, we wanted to get a picture of how people’s saving habits have been affected by the current environment. While the results of our research do certainly show that habits have changed, there is undoubtedly cause for optimism.
The majority of UK households are still prioritising saving for the future. 75% told us they are still managing to put money away into savings, recognising the importance of doing so even when times are tough.
We did find that people are generally saving less, which is not huge surprise, given that the cost-of-living crisis has made it harder for people to consistently put money away.
We also found that UK households’ savings goals have shifted over the past 12 months. The proportion saving for an overseas holiday has decreased from 37% this time last year to 28% today, whilst 20% say they are now saving for their retirement, representing a three percentage point increase compared to this time last year.
Aspiring to ownership
Again, that final statistic is cause for optimism because it reveals that savers are still adopting a long-term outlook, which is tougher to do in a period of economic stagnation. That long-term approach takes us back to aspiring homeowners.
The most important thing anyone aspiring to get on the housing ladder can do is to begin early, and set clear goals. Doing this helps break what can seem like a big target down into more manageable stages.
That said, I know that simply starting to save early isn’t a magic bullet solution to getting a mortgage when you want one. We know from talking to brokers that when people are looking for that first mortgage, even those who have saved diligently are struggling to obtain one that works for them.
This challenge is particularly acute for people who don’t have what would traditionally be viewed as a ‘regular’ income. For example, self-employed people, those who hold multiple part time jobs, or people who have undergone a major life event such as a divorce or a move back to the UK from overseas. These people are increasingly becoming the norm, and yet their circumstances mean they face even greater barriers than others to achieving their home ownership dream.
Emerging evidence shows that more and more young people are opting for mortgages with minimum terms of 35 years, providing further proof that, even with a decent amount saved away, taking that next step on the housing ladder isn’t straightforward.
It’s essential that lenders, brokers and the wider industry come together to tackle these challenges head-on to make sure everyone, no matter their job or circumstances, can reach their homeownership dreams if they have the means to repay their mortgages.
It’s time for us to start thinking innovatively. We at The Nottingham work closely with Generation Home, who offer a deposit booster which is a way for homebuyers to secure a mortgage with an interest-free loan from their friends or family members.
We are committed to exploring solutions which take into account what brokers, savers and borrowers are going through today.
It’s critical that we develop new products which support the people who need it most and, importantly, allow them to feel like their concerns are being listened to and their circumstances addressed.
We also recognise the vital role brokers play in this process and want to work constructively with the intermediary community to ensure their experiences are reflected in the solutions we develop to help savers achieve their home ownership goals.
Alison Pallett is sales director at The Nottingham
