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5 Nov 2019

First-time buyers begin to despair - but there are reasons to be hopeful

170,000 people bought their first home in the first six months of 2019

More first-time buyers are getting on to the property ladder than at any time in the past decade, but new research shows some renters are pessimistic about their chances of ever owning a home.

Data from Halifax shows many older renters are giving up on their dreams of home ownership, citing mortgage affordability issues and difficulties in saving a deposit.

Here, we look at why renters are losing faith and offer advice on saving for and buying your first home.

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Renters lose faith in home ownership prospects

New research from Halifax shows that while 57% of renters aged 18-24 believe they'll one day buy their own home, this figure drops to just 28% of 35 to 44-year-old tenants.

Halifax says that various barriers to home ownership have resulted in so many tenants believing it's now normal to stay in the rented sector for life.

1. First-time buyers are getting older

Data from UK Finance shows that 170,060 first-time buyers bought a home in the first half of 2019 - the highest number recorded in more than a decade.

However, the average age of first-timers has increased in every UK region except London over the past decade.

And while buyers in London aren't getting any older, the English capital still boasts the highest average age (33). At the other end of the scale, Yorkshire and the Humber is the only region where the average age of those buying their first home is below 30.

2. Getting approved for a mortgage is tricky

Halifax says that two thirds of would-be buyers think mortgage affordability is a big barrier to getting on to the ladder.

The good news, however, is that the current mortgage market is actually very favourable to first timers.

In the past year, 51% of all new mortgages have been given to first-time buyers, up from 38% a decade ago, as banks compete to offer low-cost long-term loans.

Rates are getting better, too, with 90% and 95% mortgages (for people with 10% or 5% deposits) having fallen in cost over the past year.

90% loan-to-value95% loan-to-value
Average two-year fixed rate in October 20182.71%3.63%
Average two-year fixed rate in October 20192.66%3.27%
Annual change-0.05%-0.36%

Source: Moneyfacts, November 2019.

90% loan-to-value95% loan-to-value
Average five-year fixed rate in October 20183.17%4%
Average five-year fixed rate in October 20192.97%3.6%
Annual change-0.2%-0.4%

Source: Moneyfacts, November 2019.

Some lenders are also becoming more innovative in their first-time buyer deals, either offering longer loan terms of up to 40 years to younger borrowers or bigger loans to borrowers with certain professions.

3. Saving a big enough deposit can seem impossible

Halifax says the average first-time buyer deposit has now hit £41,000, a figure that's increased by 52% in the past 10 years.

Deposits remain a major barrier to home ownership, with two thirds (64%) of renters saying they can't save enough to get on to the property ladder.

If you're struggling to save a big enough deposit, you could consider taking out a Help to Buy Isa or lifetime Isa, both of which offer a 25% bonus on your savings when you come to buy a home.

Help to Buy Isas are set to close to new applicants at the end of the month, so you'll need to open an account before then to benefit. You can find out more in our full guides on Help to Buy Isas and lifetime Isas.

How will you get on to the property ladder?

Help to Buy and shared ownership

Government-backed schemes such as Help to Buy equity loans and shared ownership can help first-time buyers purchase a home, though both come with some drawbacks.

Help to Buy equity loans, which allow borrowers to borrow 20% of a new-build property's value in England and Wales (or 40% in London/15% in Scotland) from the government, have been particularly popular.

Of those who took the Halifax survey, a third (35%) said they planned to use the scheme.

More than 179,000 first-time buyers in England have bought homes with an equity loan, but the scheme has faced criticism over inflated new-build property prices and spiralling costs at the end of the loan's interest-free period.

Just 6% of respondents said they'd look to use a shared ownership scheme, which allows first-time buyers to buy a share of a property (from 25%) and pay rent on the remainder.

As with Help to Buy, shared ownership has faced criticism over high overall monthly costs.

Guarantor mortgages and gifted deposits

More than a quarter (28%) of renters say they expect to rely on financial support from their family to help them purchase a property.

Financial help from a family member can come in many forms, from gifted deposits to joint property ownership. There are also a range of guarantor mortgages now available to first-time buyers.

Some of these deals allow you to buy a home without any deposit at all, though you'd need a family member to deposit at least 10% of the property's value into a special savings account. Other deals involve the lender placing a charge on the parent's home to protect itself against the child defaulting on their mortgage.

To find out more about how a family member could help you buy a home, check out our full guide on guarantor mortgages.

How to buy your first home

If you're thinking of buying your first home, Which? has advice for every stage of the journey.

It's never too early to start planning, so get ahead of the game with our guide on saving for a house deposit.

If you're ready to take out a home loan, our guides on how much you can borrow, the different types of mortgageand the best and worst mortgage lenders will give you the inside track.

Finally, you can check out our step-by-step guide on the process of buying your first home, which includes advice on everything from making an offer to exchange and completion.