Is the homeownership dream turning into a nightmare for middle-income Britain?


Unless the government intervenes, homeownership is set to die out for all but the wealthiest young buyers over the next decade.

According to worrying new research from Santander Mortgages, based on a national survey of 5,002 non-homeowners aged 18-40 years – while nine in ten still want to get on the ladder, the reality is that by 2026 just one in four under 34s will achieve that goal.

51% of those surveyed said that owning their own home is one of their top life goals – more than having children (27%) or getting married (19%). However, over two thirds (70%) of potential first-time buyers believe that the dream of homeownership is already over for many young people, with 64% expecting homeownership to fall for future generations.

The study finds that the sharpest fall in first-time buyer homeownership has been among those on middle-incomes (taken as being between £20,000-£30,000 in 2019) – with homeownership rates falling from 65% in 1996 to 27% two decades later. Of the new buyers entering the market today, 64% have household incomes of more than £40,000 and just 16% are individual buyers.

Barriers to the homeownership dream

The biggest barrier cited by first-time buyers to getting on the ladder is raising a deposit (30%), followed by getting a mortgage based on their income (15%).

The challenges faced by today’s first-time buyers include house price inflation outstripping wage inflation – 47% vs 18% in the last ten years – as well as levels of student debt and the costs of childcare. The average age of a first-time buyer has increased from 25 to 33 years old in the last two decades, and 40% have already started a family. As a result, Santander found that the most sought-after first-time buyer property is now a three-bedroom house.

Buyers’ ability to get onto the property ladder is increasingly dictated by the ‘Bank of Mum and Dad’ and family inheritances. While industry data shows that 39% of first-time buyers had help from living family, and 10% from an inheritance, Santander’s research found that 40% of potential first-time buyers were relying on an inheritance to boost their deposit. But the costs of ‘later life’, such as care, could lead to future financial challenges for those ‘gifting’ wealth as well as those expecting an inheritance.

Santander’s research also found that aspiring homeowners are underestimating the size of the deposit they need to save. With the majority of mortgage borrowing limited to 4.5x gross salary, the deposit amount buyers’ in each region say they are looking to save would price individuals, or households relying on a single middle-income, out of every region in the UK.

Despite their ambitions, Santander’s survey found that two fifths (42%) of potential first-time buyers have saved nothing at all towards their first home. Typically, men have saved twice as much as women (£11,660 compared to £5,620), while one in three men and nearly half of women (48%) have not saved anything.

Keeping the dream alive

Santander’s research found that nearly three quarters (73%) of people surveyed believe that the government should do more to help first-time buyers. Over a third (37%) want to see ‘Help to Buy’ extended beyond 2023, 35% want a cap on rent prices, and a third (33%) would like to see the stamp duty cuts, introduced by the government in November 2017 for first-time buyers, extended to the first £500,000 of a property’s value.

The ‘Future of the homeownership dream’ report calls for industry and the government to think radically and work together to explore a range of new ideas to ensure the homeownership dream is kept alive for future generations.

Potential new policy ideas suggested in the report include:

– Introducing a new lending model backed by the government to help those without family support to raise a deposit;
– Introducing more flexibility in lending affordability criteria, for example less restrictive ‘stress rates’ for fixed-term mortgages; and
– Making better use of existing housing supply and encouraging greater circulation of homes by introducing a stamp duty incentive for downsizing.

Miguel Sard, Managing Director, Santander Mortgages, commented: “It’s clear that while the aspiration to own a home is just as strong as in previous generations, it’s a dream that is looking increasingly out of reach. Without change, homeownership in the UK is at risk of becoming the preserve of only the wealthiest young buyers over the next decade. This report should be a wake-up call for industry and the government to think more creatively to keep the homeownership dream alive for the next generation of first-time buyers.”


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