/ Money

Generation of first-time buyers locked out

Red door locked with bolt

If you’re young and want to get onto the property market – think again. The cost of jumping on board is so high, it’s locked out thousands of first-time buyers. And it’s a problem that’s unlikely to be solved for a generation.

This depressing state of affairs has been put forward by insurer Genworth Financial. The number of mortgages taken out with 10% deposits (associated with first-time buyers) has crashed and burned from 245,000 in 2006 to only 28,000 in 2009.

That’s a massive 89% drop and could represent 100,000 first-timers buyers being excluded from the property ladder each year. Sure, house prices are dropping, but compared to earnings their cost is still high. A 10% deposit requires a saving of at least £18,600, which can rise to as high as £29,700 in London.

I’m a London renter, but I’ll be well into my 30s before I’ve saved that much cash. Woe is me.

First-timers need help from parents

The only hope for first-time buyers is to get help from their parents. And although the number of under-30s buying with assistance has remained constant, they now make up 80% of all first-timers – unassisted buyers have basically been locked out.

But we still want to own a home, damn it! Four in ten prospective young buyers think private renting is simply ‘throwing money away’. With the amount of rent I’m paying every month in London I wholeheartedly agree.

So deposits are too high a hurdle. Buying a house comes with too many extra costs. And mortgage lending is at its lowest for 10 years. What hope have we got if we don’t get help from our parents – an option that simply isn’t an on hand for many, including me.

And since first-timers drive the property market, the whole thing is quite simply broken. Genworth Financial warns that it could take decades to fix, which in the end will prevent a whole generation from living under the roof of their very own home. So what do you think should be done to solve this dire situation? Personally, I’m off to whimper into my coffee.


I agree the situation is depressing – but (unusually for me) I’m not sure what the answer is.

Silly mortgage lending allowed for house prices to rocket to insane levels back in the mid-noughties, which in turn perpetuated the need for people to take out the mammoth mortgages… And then the plug was (rightfully) pulled.

It seems to me that mortgage lending will need to relax some in order to keep house prices steady – feeding the market, as you say, by allowing FTBs onto the property ladder. The alternative, I guess, is a major house price ‘correction’ (or ‘crash’, depending on your point of view).

If property values tumbled by 20 or 30%, the 10% deposits required to buy them might be affordable for those of us who save hard. However, the effect that this might have on those people who already own homes, and on the wider economy, could be very serious indeed.

Were I a betting woman, my money would be on a more modest correction and a pretty sustained period of zero growth in property values, except in loony places like London where artificial forces (cash buyers, foreign investors) will keep the market inflated.

What do other people think?

Sara S says:
12 October 2010

I’m sick of the assumption that it’s only ‘young people’ who are first time buyers. I am 40 and have to rent in London (which is my home town) with no prospect of being able to buy because a 10% deposit is a thing of the past and house prices in London are completely ridiculous. To buy the equivalent flat to the one I rent (next door in fact), just a one bedroom place, I would need over 7x salary; with lenders restricting themselves to 4x salary that leaves me almost half the cost of a flat short (not including all the additional costs of actually buying something). If you are part of a couple you might be able to pull something together if you’re both working, but what about those of us who are single?

Damn Young says:
31 July 2011

Get out of London!!!!

I find this difficult to understand – When I first bought a house – most people rented and were satisfied doing so. Only the “wealthy” could actually afford a house. I had an excellent secure job

It was the Thatcher government that changed this by selling off council property without allowing the receipts of the sale to be used for new builds – this coupled to rent deregulation meant an immediate shortage of housing. People were encouraged to spend beyond means – and banks were encouraged to borrow beyond prudence.

Surely first time buyers should only buy a house if they can afford it? Most apparently cannot

I think Richard’s right. We should only buy if we can afford it. I can’t. Even with my partner, we can’t afford to rent in London and have minimal savings (and a wedding to pay for too).

I don’t mind renting. It’s not ‘throwing money away’: I have a roof over my head! I guess the issue is that private renting is such a shambles: there’s minimal security and so many horror stories to be told. And the costs are prohibitive to allow many people to live on their own. Flat-sharing in your 40’s and 50’s? Wouldn’t surprise me! Other countries seem to have got renting right. Why can’t we?

My personal bugbear is all the talk about affordable housing! What’s affordable? Earning below both the median and averaage wage (too rich for council/housing association, too poor to buy), I can’t get into the part-buy-part-rent ‘affordable’ schemes. Perhaps my partner and I could – if we could scrape together a deposit. But then I think they’re throwing money away, practically doubling your outgoings: rent AND mortgage AND service charge (as they’re always flats)? No thank you!

succeesive governments have failed to build enough affordable housing as a deliberate policy. surely housing is a human right along with education, the right to work and healthcare for all. until enough houses are built the insane boom to bust scenario will keep happening and ordinary working people will spend huge amounts just trying to get a basic roof over their heads, when are we all going to hold our govenements to account,

It is not the job of government to build affordable houses – It may be Local Councils – and all those lovely private building companies .

Equally a cheap house never has been a right in this country – All that is a right is a place to stay if you are destitute or on benefits.- not at any other time. We have always been expected to pay to rent – save a deposit – then get a mortgage provided you can afford to – otherwise renting at market value is the norm. There are “part-buy-part-rent ‘affordable’ schemes” but the amount needed reflects market costs, so are not often affordable..

Hate to point out that up to Thatcher – social housing was built by Councils – and kept pace with demand more or less – the “right to buy” of Thatcher – devastated the council housing market and caused council rent incomes to plummet.

Mind you why not write a letter to Mr Cameron asking him to reverse Tory policy…..

Accounting time is called the General Election.

Green Machine says:
16 October 2010

This may sound harsh, but if you really cannot save for the deposit, can one really afford the mortgage. when I got my first mortgage, yes I only had to raise £2,300, a small amount by todays value, BUT it was still 10% of my mortgage. So how does this relate to today, well simply that house, under several owners later, is now being sold at a price that would mean a deposit of £14,000, financially a large sum compared to 18 years ago, but still 10% and in reality, not a lot more taking into account inflation and wage changes. I think today people EXPECT that they should be granted credit based on their wants not their needs or ability to pay. You provr you van pay by raising the deposit, the financial institutions will then gladly loan money. Lets face it, would you lend money to a friend who says he is short to buy groceries, but at the same time enjoys his nigths out clubing. i am sorry, but you can’t have your loan and spalsh it. you want it, then prove you deserve it by cutting back now to pay for your future. Too many people want it NOW and want the same lifestyle choices, ie give me it all and I still want to be able to behave the same and then scream when they can not afford the debt.