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Pity the first-time buyer. Even if mortgage rates fall slightly this year (more on that in a moment) it won’t do much for aspiring homeowners.
If you’re not lucky enough to have been born into money, you’ll need several things to become a homeowner.
In the 2022/23 financial year, 58 per cent of all first-time buyers were in the top two income quintiles. Income quintiles are five statistical groups which rank Britain’s workers based on how much they earn.
And, finally, you’ll need to be prepared to borrow more for longer. Average mortgage loan lengths are rising. But the will to do this won’t be enough on its own. You’ll need approval from a building society or bank to take out a mortgage which, in all likelihood, will run into hundreds of thousands of pounds for 35 years or more. If you’re 34 when you buy your home, that means you could be repaying it in your seventies.
Lower house prices in some parts of the country will skew this figure. In London, it was £383,386.
House prices across the country are forecast to rise this year. That’s no sure thing but, if these forecasts are correct, the above statistics – the size of mortgage loans, deposits and the age of first-time buyers – are likely to rise too.
But, they have not and, honestly, cannot bring rates down enough to make buying a home affordable for most would-be first-time buyers.
At the time of writing, the average mortgage rates available for first-time buyers in Britain were as follows:
Between 4.59 and 5.19 per cent for a two-year fix. Between 4.21 and 4.98 per cent for a five-year fix.Generally speaking, lenders limit what a homeowner can borrow to 4.5 times their income (this is also known as a loan-to-income ratio). This also restricts what will be approved as “affordable” for first-time buyers with average mortgage rates still above 4 per cent.
At the end of 2024, some lenders proposed another solution to first-time buyers’ problems.
Nationwide went even further, saying it would lend six times a buyer’s income even if they only had a 5 per cent deposit.
In practice, it’s unlikely to do so.
Long story short? Even if they wanted to, lenders can’t offer that many first-time buyers the big mortgage they will need to make high house prices affordable in line with these guidelines.
Labour has pledged to build 1.5 million homes by the end of this Parliament. They need to do this to boost the economy. They also need to do it to create a new supply of housing for would-be first time buyers.
There is also an economic argument to be made against encouraging people to take out enormous mortgages for huge chunks of their lives. It will mean their take-home pay is tied up in housing when it could be spent elsewhere in the economy, reinforcing the vicious feedback loop of high house prices.
Donald Trump’s policies appear to be spelling bad news for America’s housebuilders, with their share prices falling since the election. (Photo: Rebecca Noble/Getty Images)
Britain is not the only country with a housing crisis. Since Donald Trump won the US election, much has been made of the economic boon his victory delivered to some. Shares in Elon Musk’s Tesla surged, as did the price of Bitcoin and, more broadly, US stock markets (the Dow, S&P 500 and Nasdaq) also hit record levels.
However, these very policies appear to be spelling bad news for America’s housebuilders, with their share prices falling since Trump’s election.
Added to that, Trump has pledged mass deportations which could impact the migrant workforce that America’s construction industry relies on.
As Britain learned after Brexit, the immigration ‘crackdowns’ promised by politicians can have unintended consequences for housebuilding statistics.
Ask me anything
A reader has written to me over on Instagram to express her concern about her Help to Buy loan.
The Help to Buy loan is designed to work like this. When it was available, borrowers were able to take out a government equity loan to the tune of 20 per cent outside of London or 40 per cent of the value of their home in the Capital as well as a mortgage.
In years to come, this could create problems for the first-time buyers who used the scheme but have not been able to repay their government equity loans.
Send in your questions to: @Victoria_Spratt, on X, formerly Twitter, @vicky.spratt on Instagram or via email vicky.spratt@inews.co.uk.
Vicky’s pick
Cynthia Erivo as Elphaba and Ariana Grande as Galinda in Wicked. (Photo: Universal Pictures/AP)No spoilers so, all I will say is that I particularly enjoyed the accessible sub-plot about free speech which will be understood by viewers of all ages. Indeed, in the context of the drama that has unfolded over on X in recent days with Elon Musk taking aim at British politicians, it feels particularly timely.
This is Home Front with Vicky Spratt, a subscriber-only newsletter from i. If you’d like to get this direct to your inbox, every single week, you can sign up here.
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