First-time buyers' desire for homeownership remains strong

High property prices have done little to dampen first-time buyers' spirits

First-time buyers' desire for homeownership remains strong

Record-high property prices have done little to dampen first-time buyers’ desire to step onto the property ladder, it seems.

First-time buyers are lengthening the average mortgage term they take on to access the market.

“This demand was mirrored by the Bank of England's latest figures for March 2023, which showed a significant increase in net approvals for house purchases, an indicator of future borrowing and first-time buyers have been the biggest cohort,” said Darren Deacon (pictured), head of intermediary sales at the Family Building Society.

Net approvals increased to 52,000 in March, up from 44,100 in February, although this figure remained below the monthly average for 2022 of 62,700.

Desire to own

In many parts for the country, the number of homes available for rent has declined significantly, as landlords continued to withdraw from the rental market, for several well documented reasons.

“I believe many renters faced with a shortage of places to live, as well as sharp increases in rent, will find that their potential mortgage payments are cheaper or at least comparable to renting,” Deacon said.

He added that the fact remained that it was still the desire of the majority of people in the UK to own their homes rather than rent, even though current affordability restrictions were making it very difficult for many would be borrowers, particularly first-time buyers.

Lengthening average mortgage terms

“Any move that makes home ownership more affordable, or less unaffordable, to be frank, will increase the reality of becoming a first-time buyer and help to get onto the first step of the property ladder,” Deacon said.

He also believed that people now not only expected to work into later life, but want to, unlike previous generations.

“In the past, workers were superannuated after 30 or 35-years’ toil, but it is not the case now; a 40-year term is perfectly acceptable, particularly if it makes servicing the loan more viable,” Deacon said.

He has already started to witness an increase in the average mortgage term at inception.

“Many more are exceeding the historical normal maximum 25-year term that borrowers were offered,” he added.

In addition to working longer, there was less of an overwhelming desire to be mortgage ‘free’, a long established milestone in life.

As the stigma of debt diminished, Deacon said people realised that there was value in making their assets ‘sweat’, and were very comfortable servicing a mortgage in later life.

Long-term outlook

“The bank of mum and dad is a well-known phrase these days; lenders have designed products such as our Family Mortgage, where a charge against the family members' home can be taken, or an equivalent amount in cash from a relative,” Deacon said.

Lenders were helping in other ways too, offering increased income multiple products for professionals, for example.

“We have heard murmurings about the return of Shared Ownership being considered, and now the relaunch of 100% loan-to-value (LTV) mortgages,” Deacon said.

“We have had Help to Buy which has helped many first-time buyers, and there may be more government assisted initiatives in the future.”

He added that there were also lenders offering a ‘top-up’ loan as part of the deposit for new first-time buyers, albeit they have not had the desired traction to date.

“There will always be a big demand from first-time buyers, since there has always been demand from first-time buyers, even after the credit crunch, recessions, fear of unemployment, lockdowns and market and interest rate volatility,” Deacon said.

Have you seen borrowers extending the maximum mortgage term to access the property ladder? Let us know in the comment section below.