A fifth (21%) of UK 18-to-34-year-olds and three fifths (59%) of those aged 35 to 54 are unsure if they will ever own a home or are not planning to do so at all. This is the stark conclusion from new research from Yorkshire Building Society.
The mutual also asked would-be first-time buyers about the barriers preventing them from investing in their own four walls, and the things they cited included worries about the level of financial commitment a house represents, affordability and the high cost of living.
Some 41% said that the cost of living was the key challenge preventing them from buying their first home and 43% have delayed purchasing due to high prices. Almost half (47%) said they feel so overwhelmed by the complexity of the current market that they’ve given up even looking for a property to buy.
Meanwhile, YBS’s analysis suggests opting out of owning could result in renters being £2.6m worse off over their lifetime – and this clearly would impact on their ability to pass on wealth to future generations.
The figure is is based on a comparison of renting verses buying over the 55-year period from 33 – the current average age when people buy their first home – to 88, the average lifespan of a person today.
Over this period of time, the borrower would pay £367k in mortgage payments, while the renter would pay £1.6m in rent. However, while the borrower would own a property worth £1.7m after this time, the renter would have nothing to show for it.
Even if they were to invest the equivalent of the first-time buyer’s 5% deposit of £10,000 over this time, their money would only be worth £155k. Not only that, but £960k of the renter’s £2.6m additional spend would result from continued rental payments over the 20 years from retiring at 68, while the buyer would have no accommodation costs to fork out other than occasional maintenance.
Unlike the renter, they would also have the flexibility to release capital from their home to support their retirement or pass on their accumulated wealth to their loved ones.
Life planning
Survey respondents who are looking to buy cited basic needs like freedom to live how they like (40%); wanting to start a family (34%) and providing them with security in retirement (33%) among their reasons – reiterating the important role homeownership plays in life planning.
Housing and house prices rank third on prospective buyers’ list of national priorities, behind the economy and health.
Commenting on the data, YBS director of mortgages Ben Merritt said: “These latest research findings are perhaps our most stark yet, pointing to a potential loss of faith in the idea of homeownership.
“That – coupled with our lifetime analysis of what this means for anyone who has to settle for long-term renting – shows just how big an issue this is for the UK right now, which our respondents have seconded in the priority they have assigned to housing.”
Merritt added that YBS was preparing to raise this issue in government through a policy paper and Parliamentary event calling for a joined-up industry approach to fix what is wrong with the housing market, involving lenders, the Government and other industry bodies.
“We believe homeownership is a basic right which gives people access to a range of other life essentials, and this is why we will continue doing our bit to push for it to remain available to as many people as possible.
“While it is obviously a worrying situation for first-time buyers, we want them to feel encouraged that there are solutions out there for them and if more industry players can galvanise behind this issue and give borrowers hope, they can see how compelling a prospect property still is as an asset.
Yorkshire Building Society director of mortgage distribution and managing director at Accord Jeremy Duncombe said there was a clear challenge for brokers to educate and encourage potential first-time buyers. “I think many first-time buyers assume that they will need around £30k deposit minimum to get on the property ladder but that is not the case.”
He added that affordability was sometimes a temporary issue due to optional but expensive outgoings and that FTBs often thought a mortgage was just beyond them so didn’t even contemplate an application.
“We have seen that our £5k deposit option has been used as a hook by brokers. They have not necessarily used us as a lender but it does show to clients that they ‘could get a mortgage’,” Duncombe explained.
