The latest report from the English Housing Survey (EHS), shows a shift in first-time buyer demographics: revealing a distinct change in the age, deposit size and source of deposit finance compared to a decade ago.
Highlights of the survey include:
- One in five (21%) first-time buyers were aged between 35 and 44 years in 2015-16, up from 16% in 2005-06
- In 2015-16, three-quarters (74%) of first-time buyers were couple households, a marked change from 2005-06 (66%)
- Over the same period, the proportion of first-time buyer households with dependent children increased from 23% to 37%
- Two-thirds of first-time buyers pay a deposit up to 20% of the purchase price, 29% getting help from their family (up from 22% ten years ago)
Source: English Housing Survey (2015-16)
Research paints a different picture of first-time buyers
The EHS research paints a very different picture of the journey that some first-time buyers may go on when compared to ten or twenty years ago. By understanding these changes and the attributed factors, we can see why the knowledge, experience and guidance of mortgage consultants have become more valuable than ever before.
In 1995, around 20% of first-time buyers were aged 16 to 24. They may have raised funds for their deposit on their own, have submitted a single mortgage application, and they may not have had children at the time of purchasing their first home.
Fast forward to the findings from 2016 EHS, and you’ll find that there are fewer youngsters able to afford a house in the 16 to 24 age bracket. First-time buyers could be slipping into the 25+ bracket as it takes longer to save the level of deposit now required for their first home – house price growth has been outpacing income growth for more than twenty years. As a 25+ mortgage applicant, they may also be a couple and have children.
The hard facts
According to the EHS, Londoners are choosing to raise a deposit of up to £94,088 (mean value) to secure a favourable mortgage rate on their first home, with 29% turning to family to help raise funds – a 7% increase in a decade.
While working hard, saving even harder and raiding the bank of Mum and Dad, 74% of first-time buyers will have teamed up with another person and 37% will have children before they buy their first home – 8% and 14% higher respectively since 2006.
The EHS also found that those purchasing their first property were in the two highest income bands, now accounting for nearly two-thirds (66%) of first-time buyers, compared with 58% ten years ago.
How does this affect a mortgage application?
A mortgage consultant needs to take all of the changing demographics and factors into account, and Springtide Capital is no different.
A joint application, an older applicant, a larger mortgage and having children impacts affordability. A joint application, for instance, increases the amount of evidence of income required, but equally, it increases the chances of funding with two incomes instead of one. The age of the applicant and the period in which they require the mortgage is reflected in the affordability of monthly payments, as is the age restrictions and period of mortgage allowed by lenders.
The affordability of funding for a house (prices having outpaced income for many years) and the costs of running a household with children also needs to be considered. All this has to be reviewed by an experienced mortgage consultant, who not only works out the affordability but also the correct lender to suit an individual’s needs – it’s become more of a balancing act.
Henry Knight, Managing Director, Springtide Capital commented: “First-time buyers are an essential cog in the housing market machine: without them, the market slows – they allow existing property owners to release equity and re-invest in the housing market. At Springtide Capital, we pride ourselves on understanding a changing market and identifying which product and lender are suitable for each applicant.”