House prices up, mortgage approvals up, buyer confidence up, the outlook for first time buyers, errr…

Many industry commentators, me included, can be quoted saying there are signs of increased confidence in the market; mortgage approvals are up, house prices are up, this government has ambitious housebuilding targets which is also a good sign for our sector. The outlook is positive.

However, confidence alone simply isn’t enough to sustain our market.

For hopeful buyers looking to get on the market, there are two main challenges: how to buy your home, and how to keep it once you’ve got it.

Home buying inherently comes with a lot of uncertainty. The home buying process has been named, beyond death of a loved one and divorce, as one of the most stressful life events.

After years of careful planning and dreaming, finally saving up enough deposit to get on the ladder, prospective buyers then get to the part that’s supposed to be the most fun – the actual buying of a house. However, they are then met with affordability challenges, a whole new vocabulary of homebuying jargon and an antiquated legal process.

According to Schroders, average house prices have reached 9.1x the average household income, a stark increase from just over 4x in 1992. Nationwide House Price Index data shows that year-on-year house price inflation hit a December peak of 4.7% in 2024. It is easy to see how house price growth that isn’t met by wage growth can reach an ugly crescendo.

Mortgage affordability is poised to become the dominant challenge for the UK housing market in 2025, as interest rate fluctuations and stagnant wage growth exacerbate long-standing affordability issues.

Imla’s outlook for 2025 & 2026 report calls upon government for mortgage market reform, citing regulation which surrounds mortgage affordability as a constraint which disproportionately impacts first-time buyers.

Traditional thinking simply no longer serves the modern borrower.  To address the challenges of tomorrow we need to think outside of the box and truly innovate, designing mortgage products which suit homeowners at every life stage.

Modern alternatives to fixed rate products provide flexibility. Longer-term lending allows affordability calculations to match the pay rate of mortgage loans. By embracing innovative solutions, we as a sector can play a leading role in creating a brighter outlook for homebuyers for generations to come.

Ultimately, confidence alone simply won’t put keys in the hands of prospective homeowners. To address the spiralling affordability challenge, the industry, government, and financial institutions must collaborate on both immediate and long-term solutions to restore balance and accessibility to the UK housing market, so that those without the bank of family are still in reach of achieving their homeownership dreams.

Rachael Hunnisett is director of mortgage distribution at April Mortgages.