New data from the Building Societies Association (BSA) reveals increasing concerns among homeowners and prospective buyers about affordability in the housing market.
The latest Property Tracker report shows a majority of people believe the deposit required to buy a home is now too high. Monthly mortgage costs and raising the deposit are seen as the main barriers to purchasing a home. Fewer than one in five people think now is a good time to buy a home.
The BSA report highlights that while cost of living pressures have eased for some households due to lower inflation and strong wage growth, high house prices and mortgage rates are adding to the financial burden on first-time buyers and those looking to re-mortgage or move home.
More than half (56%) of people think the deposit required to buy a home is too high. For first-time buyers, this figure rises to 63%. A typical first-time buyer now needs a deposit of around £60,000, which is 160% higher than the average £23,000 required in 2005. Wages have grown by less than half this amount in the same period.
The report also indicates that the affordability of monthly mortgage repayments is a growing barrier to buying a home, with 68% citing this as a concern, up from 62% in March. Similarly, 65% find raising a deposit to be an obstacle, up from 60% in March.
Homeowners and aspiring homeowners are eagerly awaiting the MPC announcement on the Bank Rate. Earlier this year, many were expecting a rate cut this summer, but this is now looking unlikely as some measures of inflation remain higher than expected. This could mean that mortgage affordability does not start to ease as anticipated.
Mortgage arrears levels remain low, with 88% of people not expressing concern about keeping up with their mortgage payments. However, a small minority (10%) are not confident about making their mortgage payments over the next six months, similar to 8% in March.
An increasing number of people think house prices will rise over the next 12 months, with 45% predicting increases compared to 41% in March and just 23% in June 2023. Rising house prices, especially when they outstrip wage growth, are likely to increase the already significant burden of raising a deposit for first-time homebuyers.
Paul Broadhead, head of mortgage and housing policy at the BSA, said: “It’s unsurprising that housing market sentiment has declined this month, as mortgage affordability continues to be a significant barrier to buying and owning a home. Borrowers will be disappointed that the Bank Rate is expected to remain unchanged today, as a cut would have provided a little much-needed optimism to homeowners and first-time buyers.”
“Whilst it is pleasing to see the main political parties recognising the struggles of homebuyers, particularly first-time buyers, in their manifestos, it will take more than short-term government schemes to fix our broken housing market.”
“The new government must commit to working with lenders, regulators, the wider housing market industry, and the public to make homes more affordable, more available, and more appropriate to the needs of those living in them and the world we live in.”
“In our first-time buyer report Age-old problems, modern solutions: A roadmap for change we identified potential long-term solutions that would support not only today’s first-time buyers, but which won’t fail future generations of homebuyers. We hope whichever party is leading government on the 5th July will commit to new and radical solutions to support the UK housing market.”
