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Solo first-time buyers priced out of owning majority of homes

Solo first-time buyers priced out of owning majority of homes
Christina Hoghton
Written By:
Christina Hoghton
Posted:
08/11/2023
Updated:
08/11/2023

Single first-time buyers with an average salary and 5% deposit would not be able to afford three quarters of typical first-time buyer properties on the market.

Typical first-time buyer market properties are studio flats and one or two-bedroom flats and houses, according to analysis of ONS data by Rightmove.

Based on the average income of £34,793, a borrower would be eligible for 4.5 times income, enabling them to borrow £156,569 with a deposit of £8,240. This means they have a total budget of £164,810.

For single first-time buyers in the capital, based on these figures, they would only be able to afford 2% of studios, one- or two-bedroom properties.

This compares to 67% of first-time buyers able to afford properties in the North East.

Westminster, Islington and Camden topped the list of areas that first-time buyers would struggle to afford. On the flipside, West Dunbartonshire, Aberdeen City and North Lanarkshire were the most affordable areas.

Rightmove added that 95% loan-to-value (LTV) mortgage rates were usually highest, with the lowest rate coming in at 5.59%.

It noted that assuming a maximum budget of £164,810, a buyer with a 5% deposit would repay £970 per month over 25 years, compared with £818 per month for a buyer with a 15% deposit.

If the mortgage term was extended to 35 years, payments would fall to £850 per month with a5% deposit and £706 with a 15% deposit.

Rightmove added that advertised rents were 10% higher than last year for new tenants and average rents for studio, one- or two-bedroom properties swallowed up 38% of the average salary.

The property site said that the high rents made it “challenging” for those looking to move from the rental market to owning their first home.

However, for first-time buyers teaming up, they could afford 70% of smaller properties across Great Britain with a 5% deposit, due to the increased borrowing power.

Rightmove: Government help needed

Tim Bannister, Rightmove’s property expert, said: “Having enough affordable homes in the right places has been an ongoing challenge. It’s clear from our analysis that people trying to buy on their own on the average salary are likely to be priced out of the majority of homes without significant financial help from elsewhere.

“With the Autumn Statement fast approaching, the government is likely looking at multiple options and how they could help homemovers, and so we wanted to highlight that this group would particularly welcome any help or incentives.”

Matt Smith, Rightmove’s mortgage expert, added: “Any focus and support for those with the smallest deposits is always going to be welcome. However, in reality the mortgage guarantee scheme is only able to help a very small portion of movers, with the majority of first-time buyers preferring to get the affordability benefits of saving for a bigger deposit.

“If the scheme was cancelled then it may be seen as a disappointing outcome by some, but in reality it’s unlikely to have a significant impact on consumer choice, as many lenders are offering five per cent deposit deals outside of the government scheme.”