How can first-time buyers get on the property ladder as prices soar?

This is Money Podcast

This is Money

Business News, Business, Investing, News

4.1 • 650 Ratings

🗓️ 12 December 2021

⏱️ 52 minutes

🔗️ Recording | iTunes | RSS

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Summary

The greatest hurdle first-time buyers face after years of house prices rocketing far faster than wages is saving for a deposit.

A 10 per cent deposit on the average £273,000 home, according to Halifax’s index, would be £27,300 – roughly an entire year’s average salary.

That’s a tough gig to save while paying rent, bills, commuting costs, living expenses and trying to at least enjoy your 20s or 30s a little bit.

So what can prospective homeowners do to get that money? How long would it take to save and can the often-maligned Lifetime Isa be a real no-brainer of a booster here.

On this week’s podcast, Georgie Frost, Helen Crane and Simon Lambert talk about trying to buy your first home, saving for a deposit, and whether new Bank of England rules designed to make mortgages easier to get could end up backfiring and sending prices even higher.

Those potential rule changes come about because problematically, if a first-time buyer could save that £27,300, they would then need to borrow £245,700 on a mortgage to buy the average home.

Even if they were able to find a bank or building society that would offer to lend them five times their salary, an individual first-time buyer would need to earn about £50,000 per year to qualify.

A shift to enabling first-time buyers to borrow more would bridge that gap, at the expense of huge mortgages, but could it just drive house price inflation.

Also on this week’s podcast, could a savings platform boost your rate, what a damning report into Ofgem’s role in energy supplier collapse said and in the year that is a gift that keeps on giving, Christmas present inflation.

Transcript

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0:00.0	Welcome to This Is Money podcast. I'm Georgie Frost and joining me and editor Simon Lambert today is assistant personal finance editor, Helen Crane.
0:08.1	And coming up, home ownership among the young has nearly halved since the 1980s, yet house prices continue to soar, making raising a deposit seem impossible for many.
0:17.1	So how can you do it and do it quickly without the bank of mom and dad?
0:22.0	Good plans to make things better by relaxing mortgage affordability checks actually end up making the situation worse.
0:28.0	Also today, OffGEM gets blasted over the energy supplier dominoes, which has left us with a
0:33.4	multi-billion pound bill. Could a savings platform help boost your rate and beat the banks
0:38.4	and Christmas gift inflation? Nothing is safe. Don't forget, in step to date, with all the latest
0:44.4	breaking money news, just go to this ismoney.co.uk or download the app but first. UK house prices
0:51.1	continue to power on, fuelled by high demand for limited supply, low mortgage rates and a strong labour market.
0:58.4	November's figures show prices registered their strongest three-month growth in 15 years. At the same time, home ownership among young has halved since the 80s and not out of choice.
1:10.0	Now, while two-thirds of parents have helped their kids
1:12.1	get on the property ladder, not everyone has the bank of mum and dad to draw from. So if that is
1:17.0	you, what hope is there? Any at all? Helen, what's happening with house prices? Is it ever going
1:24.8	to stop? Sure. So you're right in saying that over the last, about a year and a half,
1:30.1	since the housing market opened up following the first national lockdown,
1:34.4	house prices have gone absolutely crazy.
1:36.5	So by at some points, the year-on-year figure was around 11%.
1:41.8	So that's £20,000 plus in a year on the average homes. So huge increases.
1:49.5	And unsurprisingly, you know, your house price has been going up for a long time, but it's really kind of turbocharged in the last year or so.
1:57.9	So that means that in the long term, now many fewer young people are able to get on
2:05.5	housing ladder than they were basically the last generation. So Generation X's in the 1980s,
2:13.3	51% of those people owned a home in 1989, so that's 25 to 34 year olds.
	...

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