Affordability challenges deter two in five first-time buyers from buying a home

Lender has proposed a viable solution

Affordability challenges deter two in five first-time buyers from buying a home

Securing a mortgage is proving to be a significant hurdle for 42% of potential first-time homebuyers, deterring them from pursuing homeownership, according to recent findings by digital mortgage lender Perenna.

The process is especially daunting for nearly two thirds, or 63%, of these buyers who struggle to secure a sufficient mortgage, with the issue most pronounced in London, where 65% face difficulties and property prices soar 34% above the UK average.

Income constraints further complicate matters for 68% of first-time buyers, with mortgage income limits capping the amount one can borrow to four or 4.5 times their income. This restriction emerges as a critical barrier amid an escalating housing affordability crisis, with the average house price in England now eight times the average individual income.

The affordability challenge has prompted 50% of first-time buyers to postpone significant life events, such as marriage or starting a family, in an effort to save for a larger deposit.

Perenna said the collective impact of these issues has led to a widespread feeling of discouragement among potential buyers, put off by the strenuous and often disheartening process experienced by others.

In response to the affordability dilemma, the lender has proposed a viable solution – long-term fixed rate mortgages. These mortgages, extending over 10 years, are chosen by 20% of respondents, with 72% acknowledging that the stability of not having repayments increase would boost their confidence in becoming homeowners.

Furthermore, 40% of respondents believe mortgage lenders should offer better support to first-time buyers by allowing them to borrow more. Nearly half, or 48%, find the prospect of a mortgage that enables higher borrowing particularly appealing.

Perenna said it wants to address these concerns by offering long-term fixed rate mortgages ranging from 15 to 40 years. Rates for first-time buyers now start from 5.76% for a 90% LTV over 30 years with a product fee, and 5.99% for a 95% LTV over 30 years with a product fee.

“It’s a travesty younger people are put off from one of the most rewarding experiences in life, becoming a homeowner,” said Arjan Verbeek (pictured), chief executive and co-founder of Perenna. “Seeing mortgage payments shoot up for millions of people because of how traditional mortgages work will, of course, put off many would be homebuyers. We need to change this trajectory urgently.

“We believe everyone deserves a chance to own their home and enjoy living in it without worry. Longer-term fixed rate mortgages are part of this solution, providing greater borrowing power, and stability through payments that don’t shoot up, a far cry from the way traditional high street mortgages work. Perenna’s goal is to make homeownership a reality for first-time buyers and make us a nation of happy homeowners.”

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