First-time buyers facing most expensive properties in 70 years as housing ladder 'broken', new report finds

Construction work continues on apartment blocks on March 15, 2024 in London
London was found to be an outlier by the report, with first-time buyers needing up to 150 per cent of their gross annual income for a deposit -Credit:Carl Court/Getty Images

Many people dream of stepping onto the property ladder. It's considered an important way to move towards financial stability and security, as well as investing financially in the future as property prices rise.

However, a new report from the Building Societies Association (BSA) has found that first-time buyers today are facing the biggest challenges in 70 years, due to how expensive properties have become. The report was put together by housing market analyst Neal Hudson, and it took a sweeping look at the current housing market - and even questions if the 'property ladder' has been broken beyond repair.

The report found that it's not just about the costs of buying a property, but also the costs of then owning the property. The BSA’s property tracker has found that struggles to afford mortgage repayments has become the biggest barrier to purchasing a property.

READ MORE: Life on London's most expensive street right next to the King's closest Marks and Spencer

A tower block along a residential street in London
People without family help or on single and lower incomes have been excluded from home ownership, the report found -Credit:Chris Ratcliffe/Bloomberg via Getty Images

The report says that many first-time buyers looking to step onto the property ladder are finding they need a deposit as much as their gross household income, as well as facing increasing mortgage rates. These rates have reached highs last seen leading up to the financial crisis in 2008.

The report also looked at how high deposit costs are increasingly relying on the 'Bank of Mum and Dad', with an average deposit in London sitting at £144,000. More people are finding they need two, above average, incomes, in order to afford even a first property. People without family help or on single and lower incomes have been excluded from home ownership, the report found.

The increase in house prices relative to incomes over the last 20 years has increased the size of a deposit by more than 80 percent, the report found. As well as this, in London, the cap on higher loan-to-income lending also has the biggest effect of anywhere in the country.

London buyers having to borrow 3.3 times their income, due to rising mortgage rates.

The report says: "A 95 per cent loan to-value mortgage, if available, would be unaffordable to all but the most income rich, equity poor first-time buyers in London." When analysing London as a location for first-time buyers, the city is a clear "outlier" according to the data.

Based on the data from the final quarter of 2023, the average first-time buyer needed a deposit equal to 150 percent of their gross annual income, compared to the UK average of 100 percent of their gross income. London buyers also had to borrow 3.3 times their income, due to rising mortgage rates.

The rise in mortgage rates plus the amount people are needing to borrow relative to their incomes in London and regions in the south of England has resulted in these areas seeing the biggest fall in first-time buyer completions recently, the report found.

A block of flats against the London skyline
The 'property ladder' itself has potentially broken, the report has warned -Credit:Chris Ratcliffe/Bloomberg via Getty Images

The links between the mortgage and housing markets were also examined, and how they fit into the wider economy. The report looked at the important balance of financial stability and the number of first-time buyers and found that financial stability has been prioritised, causing many to be excluded from home ownership.

The 'property ladder' itself has potentially broken, the report warns too. Data examined how lifetime costs of buying and owning homes across different generations varied, and the report found that conditions over the last 70 years allowed many first-time buyers to move up the ladder quickly as house prices rose, combined with falling interest rates that lowered the value of mortgages compared to wages.

'Fewer opportunities to move up the housing ladder'

But now, the report suggests the economic conditions that helped previous generations buy houses was the exception - as real wages have stagnated and interest rates have risen again. In a gloomy prediction, the report says we're unlikely to see another long period of rising house prices relative to earnings in the way our parents and grandparents did in previous decades.

First-time buyers could be repaying their mortgage for 20 or 30 years of ownership, leading to fewer opportunities to progress up the housing ladder without significant career progression or an inheritance. The report says this will have a severe consequence on the ability of first-time buyers to trade up in the future, if they need more space for children or for elderly parents to live with them.

The report's solution is to call on the government to come up with a raft of housing policies and reforms, while working together with the housing market industry and the public. Smaller deposits and less need to rely on family support to buy properties is essential to helping home ownership easier to access for first-time buyers.

Homes should be made "more affordable, more available, and more appropriate to the needs of those living in them and the world we live in," the report urges.

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