First Time Buyer Index Q1 Report March 2017 aldermore.co.uk
First Time Buyer Index Q1 March 2017 2 Foreword House prices have continued to rise over recent months, despite expectations that the Brexit vote to leave the EU may cause prices to fall. This causes difficulties for first time buyers looking to get on the first rung of the housing ladder, in addition to rises in the cost of living and rock-bottom interest rates making it difficult to save. Our latest report underlines the struggle faced by first time buyers, and particularly the self-employed, who face further hurdles securing a mortgage. Around two thirds of the self-employed surveyed said they do not know how they will manage to get on the property ladder.this highlights the need for lenders such as Aldermore who can help first time buyers achieve their dreams. The first rung of the housing ladder seems increasingly out of reach, with the cost of homes in the UK increasing by around a fifth over the past three years. Raising a deposit remains the biggest difficulty for prospective first time buyers, particularly for those unable to rely on the help of family or friends. Fewer than one in five said that they could afford a deposit simply with their own savings. Around nine in 10 respondents felt buying a property is difficult, particularly in London. The end of the Government s Help to Buy mortgage guarantee scheme has disappointed many first time buyers. Our survey shows that around two in five would like to see this scheme reintroduced. This is despite lenders, including Aldermore replacing the Help to Buy Mortgage Guarantee scheme with like-for-like products. This highlights the importance of getting the message across. However, there is some positive news for prospective first time buyers. Latest figures 1 show that last year saw the highest number of mortgages for new homeowners since 2007. There are options to help those struggling to gather a deposit. For those looking to buy a new build, the equity loan element of Help to Buy is available until 2020, slashing the deposit needed to and offering interest-free loans for a further 20% from the government. There are also various products available from providers which are aimed at first time buyers including Aldermore s high LTV mortgage products that like-for-like replace the Help to Buy Mortgage Guarantee scheme for those who do not have a large deposit. We welcome the announcements in the Government s Housing White Paper, focused on tackling the housing crisis, and delivering more homes in the UK where needed. We hope to see more proposals going forwards to address the difficulties first time buyers face across the UK. Charles McDowell, Commercial Director, Mortgages 1. https://www.cml.org.uk/news/press-releases/june-2016-monthly-lending-trends/
First Time Buyer Index Q1 March 2017 3 Attitudes to buying a first property How do you feel when thinking about buying your first home? Two thirds (6) of prospective first time buyers feel that buying a home is unachievable for them at the moment, and 58% cannot see how they will ever be able to get on the property ladder. Around two thirds of self-employed respondents (62%) say they do not know how they will ever manage to get on the property ladder. More than half (5) of respondents say getting on the property ladder is expected of them at their age. Nearly one in five (18%) first time buyers say they are under pressure from their family to buy, while 18% say they are feeling the pressure from their partner. Buying a house is expected of me at my age I want to buy a house to put down roots I ve dreamt of having my own home 5 19% 66% 11% 7 9% My family are putting me under pressure to buy My partner is putting me under pressure to buy I want to buy because I will rely on my property to fund my retirement Renting is too expensive and a waste of money Buying a home feels unachievable for me at the moment I can t see how I ll be able to get on the property ladder 18% 59% 18% 48% 46% 20% 69% 12% 6 14% 58% 17% Net: Agree Net: Disagree
First Time Buyer Index Q1 March 2017 4 Biggest obstacles to getting on the property ladder In general, how difficult do you currently think it is to buy your first property in the UK? 3 32% Just over nine in 10 (94%) respondents think it is difficult to buy their first property in the UK, around the same as the previous quarter (94%). Around two thirds (67%) believe it to be very or extremely difficult, whilst only 6% of total respondents do not think it is difficult. Over two thirds (68%) of those living in London (68%) say it is very or extremely difficult, while in the North East, 5 say it is extremely difficult. 27% 1% Don't know 1%
First Time Buyer Index Q1 March 2017 5 Which of the following do you see as the biggest obstacle to people who are looking to buy their first home in the UK? Raising a deposit continues to be the biggest obstacle faced by potential first time buyers, with more than a third (3 compared to 39% in Q4 2016) of respondents saying this is a bigger hurdle than property prices (29%). Mortgage affordability is the greatest obstacle for one in 10 (10%), compared to 6% in the previous quarter. Just securing a mortgage is the biggest obstacle for 14% of self-employed respondents, compared to 9% in full-time employment. Raising a deposit 3 29% 10% 10% Employment status 4% Interest rates Fees associated with buying a property (i.e. legal costs) Understanding the 4% 4% Other 1% None of these 0% Don't know 1%
First Time Buyer Index Q1 March 2017 6 How do first time buyers plan to get on the ladder? With my partner 64% On my own 30% With a friend/ friends With parents/ family Don't know Not applicable - I will not use a 2% How are you planning to apply for a mortgage to fund your first home in the UK? There was a rise in the number of respondents saying they plan to apply for a mortgage on their own, at 30% compared to 2 in Q4 2016. The number saying they are planning to apply with their partner reached almost two thirds (64%), compared to almost half (4) in the previous quarter. A third (3) of those in full-time employment planned to apply for a mortgage on their own, the same as Q4 2016, compared with 2 of those self-employed.
First Time Buyer Index Q1 March 2017 7 How do you plan to fund your deposit? The number of respondents who are planning to use parental or family assistance for their deposit stayed around the same, at a quarter (26%) of first time buyers when compared to Q4 2016 (27%). This varies across the regions, with 31% of those in London requiring financial assistance, compared with just 22% in Wales. Using my own savings Using joint savings with my partner With parental/ family assistance Use my own savings only From inheritance 12% 18% 26% 46% 4 Fewer than one in five (18%) plan to use only their own savings to fund their first property purchase, and just over one in 10 (12%) will use an inheritance. The number of those who will be joining forces with their partner in order to fund their deposit has risen quarter on quarter to 4 from 38% in Q4 2016, meaning the number of people buying with their partner has also increased considerably from 4 to 64%. Borrow from friends Other Don't know 1% 4% Yes - I would consider living with friends or family to help save for a deposit 38% No - I would not consider living with friends or family to help save for a deposit 3 Would you consider living with friends or family to help save for a deposit? Yes - I am currently living with friends or family to help save for a deposit No - I would be willing to, but living with friends or family is not an option for me 1 1 Just over half (5) say they would consider living with friends or family to help save for a deposit, rising to 68% when including those who would be willing but for whom it is not an option. A total of 1 are already living with family or friends to help save for a deposit. One in five (21%) prospective buyers in London are the most likely to be currently living with friends or family to help save.
First Time Buyer Index Q1 March 2017 8 Which of the following things are you doing in order to save money for your first property? Slashing spending is top of the list when it comes to saving for a deposit, with nearly one in three (30%) cutting back on eating out and almost one in four (2) cutting back on holidays. Around one in five respondents are giving up expensive food brands (19%) or cutting back on buying clothes (19%), while 21% have been working extra hours or shifts to save money. Have cut back on eating out 30% Have cut back on holidays Have been working longer hours /extra shifts Have stopped buying more 19% 21% 2 Have cut back on clothes 19% Have stopped going out with friends Have begun to take packed lunches to work 17% 17% Have started walking /cycling to work 9% 9% Have taken a second job 8% Have cut back on gym membership 6% Have gone back to full time employment Have moved in with my parents 6% 4% Have stopped paying for a cleaner Cut back on childcare Have sold my car 2% Other 2% No I am not doing anything 18%
First Time Buyer Index Q1 March 2017 9 What are first time buyers thinking? Which of the following do you think would most help first time buyers? A key request for first time buyers is to address rising house prices (46%). Two in five (39%) think the Government s Help-to-Buy scheme should be extended, following the closure of the mortgage guarantee scheme in December 2016. More than half in the previous quarter (52%) said the closure affected their planned property purchase. Three in 10 (30%) just want to see the process simplified. For 37% of respondents who are self-employed, introducing better mortgage products would help most, alongside adapting the criteria for self-employed borrowers (3). Address rising house prices 46% Extend the Help to Buy scheme 39% 30% Simplify the buying process Introduce better mortgage products 29% 28% Build more houses 2 savings products Adapt lending criteria to better help FTBs 18% Adapt lending criteria to better help self-employed 11% Adopt Scotland s home buying system 11% None of the above 2% Don t know / not sure 6%
First Time Buyer Index Q1 March 2017 10 What was the hardest part of the process you had to go through to purchase your first home? Just under one in 10 (8%) say the length of the purchase process was the hardest part, while 9% said this was securing the mortgage. Of those who have recently bought, the main problem experienced was saving enough for a deposit for around one in five (18%), whilst one in 10 (10%) found the whole process very difficult. Raising the deposit 18% 10% Securing a mortgage 9% 8% 6% 6% 6% All the admin involved Legal jargon/dealing with solicitors Being discriminated against based on my employment status Being gazumped by a rival bid 2% 2% Other 1% Don t know
Fewer than one in five (18%) plan to use only their own savings to fund their first property purchase. Around two thirds of self-employed respondents (62%) said they do not know how they will manage to get on the property ladder Key findings A third (32%) of recent first time buyers say they had to give up being self-employed to get a mortgage 39% think the Government s Help-to-Buy scheme should be extended, following the closure of the mortgage guarantee scheme in December 2016 Just over half (52%) say they would consider living with friends or family to help save for a deposit The number of first time buyers purchasing a property with their partner has increased considerably from 4 to 64% since Q4 2016 aldermore.co.uk
First Time Buyer Index Q1 Methodological note Research conducted by Opinium Research between 21 to 26 February 2017 amongst 1,502 potential FTBs and 502 actual FTBs. Our sample has been weighted to reflect a nationally representative audience Contact For any questions or comments on this report please contact: Rachael Snelling, Aldermore 0208 1853 102 rachael.snelling@aldermore.co.uk aldermore.co.uk March 2017 12