More than a fifth (21%) of 18 to 34-year-olds, and 59% of those aged 35 to 54, are unsure if they will ever own a home, or are not planning to do so at all, research from Yorkshire Building Society has revealed.
Some of the most common barriers cited by potential borrowers were worries about the level of financial commitment a house represents, affordability and the high cost of living.
In fact, 41% said that the cost of living was the key challenge preventing them from buying their first home and 43% delayed purchasing due to high prices.
Half (50%) said they felt overwhelmed by the complexity of the current market.
Meanwhile, the society’s own analysis suggested that opting out of owning could result in renters being £2.6m worse off over their lifetime, in addition to impacting their ability to pass on wealth to future generations.
This was based on a comparison of renting compared with buying over the 55-year period from 33 – the current average age when people buy their first home – to 88, the average lifespan of a person today.
Over this period of time, the borrower would pay £367,000 in mortgage payments, while the renter would pay £1.6m in rent.
However, while the borrower would own a property worth £1.7m after this time, the renter would have nothing to show for it.
Even if they were to invest the equivalent of the first-time buyer’s 5% deposit of £10,000 over this time, their money would only be worth £155,000.
In addition, £960,000 of the renter’s £2.6m additional spend would result from continued rental payments over the 20 years from retiring at 68, while the buyer would have no accommodation costs other than maintenance.
The society’s research, carried out by Opinium among 1,000 potential first-time buyers looking to purchase their own homes within the next three years, along with a separate, nationally representative sample of 2,000 people, showed that the key motivator for buying among 55% of people, was not wasting money on rent.
This sentiment was felt most among people in the 35 to 44 age bracket (64%) and those aged 45 to 54 (67%).
Survey respondents looking to buy also cited needs like freedom to live how they like (40%), wanting to start a family (34%) and security in retirement (33%) among their reasons.
69% said they would consider extending their mortgage term to make it more affordable, and 83% would look to try to pay off a lump sum to make their mortgage more affordable.
37% of prospective first-time buyers ranked housing and house prices as third on the list of national priorities, behind the economy (48%) and health and the NHS (46%), and ahead of immigration, crime, environment, terrorism and defence.
Ben Merritt, Yorkshire Building Society’s director of mortgages, said: “These latest research findings are perhaps our most stark yet, pointing to a potential loss of faith in the idea of homeownership.
“That – coupled with our lifetime analysis of what this means for anyone who has to settle for long-term renting – shows just how big an issue this is for the UK right now, which our respondents have seconded in the priority they have assigned to housing.”
He added: “This is why, as a leading mutual set up to help ordinary people own their own homes, we are doing everything we can to champion the right to homeownership.
“We launched our £5k Deposit Mortgage in March, which enables people to buy a house worth up to £500,000 with a deposit of just £5,000; and we are also preparing to raise this issue in government through a policy paper and Parliamentary event calling for a joined-up industry approach to fixing what is wrong with the housing market, involving lenders, the
Government and other industry bodies.
“We believe homeownership is a basic right which gives people access to a range of other life essentials, and this is why we will continue doing our bit to push for it to remain available to as many people as possible.
“While it is obviously a worrying situation for first-time buyers, we want them to feel encouraged that there are solutions out there for them and if more industry players can galvanise behind this issue and give borrowers hope, they can see how compelling a prospect property still is as an asset.
“With a little help – homeownership really is still worth the effort. And with innovative products like our £5k Deposit Mortgage, they could turn just £5,000 into a nest egg worth £1.7m.”
Article from The Intermediary by Jessica O'Connor
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