Mortgage industry research on affordability estimates that the cumulative shortfall in first-time buyer numbers since the financial crisis reached 3.1m by the end of 2023.
Despite strong affordability during the ultra-low interest rate years from 2013 to 2022, first-time buyer numbers failed to pick up to the level previous trends would have suggested.
The research - by the Intermediary Mortgage Lenders Association - reveals that, over the last 40 years, two periods have provided excellent affordability, with mortgage repayments taking up less than 30% of a first-time buyer’s income: 1993 to 2003 and 2013 to 2022. In the first period, first-time buyer numbers averaged 500,000 a year. In the second, the figure was just 330,000.
One possible explanation for the muted resurgence in first-time buyer numbers in 2013-2022, despite excellent affordability, is the wide-ranging regulation that was put in place in response to the financial crisis, notably higher capital requirements on high Loan To Value lending and the Bank of England rule restricting lending at or above 4.5 times income to no more than 15% of lenders’ advances (if they lender more than £100m a year).
The impact of tougher regulation has been compounded since interest rates started rising, with first-time buyer numbers dropping sharply from 405,000 in 2021 to 257,000 last year.
The research also reveals that it is now more expensive to buy than to rent in every region of the UK except the North West, Scotland and Northern Ireland.
This is a dramatic turnaround since IMLA’s last analysis of affordability, which was published in September 2021, when it was cheaper to buy than to rent in all regions. The change has occurred despite a sizeable rise in rents. Between September 2021 and April 2024, rents rose by 22% nationally and 24% in London.
Kate Davies, executive director of IMLA, comments: “Homeownership brings a range of invaluable benefits to individuals and their families, not just in terms of the accumulated wealth it confers but the peace of mind afforded by security of tenure. It can also benefit wider society, helping to build settled communities.
“Falling first-time buyer numbers means rising demand in the private rented sector, pushing up the cost of rents and increasing the challenge facing tenants, including growing numbers of older people forced to rent into retirement. This in turn puts greater pressure on the social rented sector, already bursting at the seams.
“IMLA believes that government can help future first-time buyers by examining the regulatory barriers to ownership. We believe that it would be beneficial for consumers if government were to establish a framework for regulators where the interests of future first-time buyers are explicitly recognized, with affordability regulations reassessed accordingly.”
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Obviously if the numbers don't stack people won't be granted a mortgage. It doesn't matter if affordability looks better if the criteria has tightened up.
At certain times around 2019 to 2022 the market was complete carnage. Things like COVID restrictions and Stamp Duty holidays meant conveyancing was a nightmare. Mortgage offers were expiring before solicitors could complete. To lose a house in those circumstances must have put some people off from trying again.
Then mortgage rates shot up and a lot of people who didn't buy must be feeling very relieved they are still tenants. My cleaner saw her mortgage payments go from £500 a month to over £1200. Rents certainly haven't risen to that degree.
First of all they destroyed private landlords with Rules, Regulations, double Stamp Duty and Licensing Schemes, Higher taxes and Section 24 etc’ replacing the providers with much more expensive Corporate Landlords & Institutions.
The same treatment is now being dished out to the buyers, did someone say there’s a Housing Crisis.
We say it 🤔 but nothing worthwhile appears to be being done to help 🤷♂️
It is without question cheaper to rent than buy for many in most arears. A family member unfortunately didn't head the advice to sell up their home in 2021, and is trying to sell now in a very poor market (her interest only mortgage has gone up by 1,900%.) Other younger family members are thankful they did not buy and remained renting even though they are now homeless after their landlord had to sell up & evict them (2nd time in 18 months).
Talk about a rock 🪨 and a hard place 👎🏻😱
Lenders aren't going to had out large wedges of cash to any old Tom,D, or Harry, why would they?
I do think lenders rules are too strict especially for BTL where, if you are putting at least 25% into the deal, it's unlikely that the lender is taking any risk at all. Even if the property is repossessed there should be no need to sell it at over 25% below market value. So its your 25% that disappears. Different story at higher LTV I guess, and we all know people who didn't pay the rent and therefore lost their home eventually.
Had the PRS not been systematically killed off there would be plenty of happy renters out there today. Renters have the freedom to move easily for new jobs, don’t have to do any property maintenance, call the landlord in an emergency and in some cases have furniture provided. This was how it was during the Blair government. I fear the incoming Labour government will make life hell for landlords.
During the buy to let boom years, they were giving away mortgages to anyone, to dodgy people with little experience of being a landlord. When things then got tough, these folk simply handed keys back or if a company, went bust. The banks then took the hit. And in the end it was us customers that paid for their reckless lending.
Fast forward to now and every pound has to be accounted for. A parent can't bung their child some money to help with the deposit without reams of official documentation. Tax liabilities kick in. Affordability tests. All because banks failed in the past to lend wisely and allowed criminals to launder money through property.
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