Common barriers faced by First-Time Buyers

Buying a home is considered one of life's biggest milestones, however a recent survey found that only 28% of people aged 25-34 owned a home, down from a high of 51% in 1989. Here we look at some of the most common barriers to home ownership and the ways in which specialist lenders, like West One, can help first-time buyers to achieve their home ownership dreams...

Saving for a deposit

Saving for a deposit is often cited as one of the biggest concerns amongst first-time buyers. As of July 2022, the average price of a home in the UK was £293,221, meaning a first-time buyer planning to purchase a property with a 25% deposit, would need to save a substantial £73,305 - and that's before factoring in additional costs such as legal fees and stamp duty!

As energy bill, inflation, and rental prices continue to skyrocket, it's going to be increasingly difficult for first-time buyers to save - without assistance.

Research from Legal & General found that 56% of first-time buyers aged under 35, received financial support from the Bank of Mum and Dad to help them onto the housing ladder. However, it is not just the Bank of Mum and Dad supporting first-time buyers, increasingly grandparents are helping their grandchildren with gifted deposits or a loan. 

While not every parent/ grandparent will have disposable funds readily available, there is a growing number who are asset rich, due to the increasing value of property in the last few years.

One option to release funds tied up in the property is to remortgage, however this is not always possible and will depend on the individuals' circumstances. A second  charge is a great option for those homeowners that have a mortgage and can afford to make monthly repayments on another loan. At West One, we have seen a marked increase in second charge borrowers who would rather give their children money now instead of years down the line as an inheritance. Our second charge mortgages have criteria that may enable parents / grandparents to release equity in their properties for the benefit of their relatives. Find out more about West One's second charge mortgage products here.

Overlooking shared ownership

Shared ownership is a fantastic way for first-time buyers to take their first steps onto the property ladder and it's much easier to achieve than full ownership. With shared ownership, a first-time buyer will be able to take out a mortgage on a percentage of a home, with a housing association owning the remainder of the property. As the mortgage for a percentage of a property will be smaller, so too will the size f the required deposit.

Another benefit of shared ownership is that the homeowner will start building up equity in the percentage of the property that they own, which will help them when taking their next step on the property ladder.

However, first-time buyers need to be aware that they will be paying rent on the non-mortgaged part of the property alongside their monthly mortgage payments. The combined cost of the mortgage and rent payment can be as much (and in some cases more) than the repayment of a full mortgage. 

The borrower has the option to increase the percentage of their ownership up to 100% through a process called 'Staircasing'. It's important to note that when buying an additional percentage of a shared ownership property, the percentage will be valued at the current market value, not the value of the property when the original percentage was bought.

Reliance on high street lenders

The pandemic caused significant disruptions to the finances of many people, from missed payments to periods of unemployment. As such, an increasing number of borrowers, including first-time buyers, are finding that their circumstances do not fit within the stricter criteria of high-street lenders.

However, a rejection from the high street does not have to mean the end of a first-time buyer's dream of home ownership. A specialist lender, with a manual underwriting process, will look at the client as an individual, taking the time to understand their situation and ability to pay their mortgage based on their current situation rather than a blip that occurred 18 months ago.
In addition, here at West One, we don't use credit scores, so an individual with a limited credit history can be considered.

Unaware of available government support

With the Government Help to Buy scheme due to reach its conclusion in March 2023, manny first-time buyers may be mistaken in thinking there are no other support options from the government available. However, there is another scheme in place which doesn't get as much publicity - the First Homes scheme. This scheme is available to first-time buyers and enables them to purchase a home for 30% to 50% less than the properties market value. The scheme isn't available on all homes, rather only on new homes built by a developer or a home that was originally bought as part of the scheme. 

To qualify, the first-time buyer must be aged 18 or over and buying the home as part of a household where total income is no more than £80,000 (or £90,000 if living in London).

While this can be a great way for first-time buyers to get on the property ladder, it's important that they are aware that if they choose to sell the property, they will only be allowed to sell to a first-time buyer that I eligible for the scheme and that the percentage discount must be passed on.

Lack of financial knowledge

Unfortunately, there seems to be some confusion around how mortgage brokers work and the benefits of working with one. A survey carried out in March 2021 found that only 48% of prospective home buyers had consulted a mortgage broker.

As buying a property and obtaining a mortgage is one of the biggest financial decisions an individual can make, it's important that the borrower is making an informed decision and choosing the best mortgage for their circumstances.

A mortgage broker will have a road knowledge of mortgage products available from multiple lenders and will search the market on behalf of their client. Often, mortgage brokers have access to products that are unavailable to direct borrowers and awareness of lenders outside of the mainstream, including a specialist lender like West One, who many offer more flexible criteria to suit the needs of the borrower.

 How can West One help first-time buyers to overcome common barrier to home ownership?

West One offer a comprehensive range of residential mortgage products to borrowers who are unable to obtain a mortgage via the high street, specifically borrowers that have complex circumstances. At West One, we take a personal approach to underwriting and the time to understand the circumstances of the individual.

Our dedicated broker support team are on hand to talk through any cases you may have and help find the right solution for your clients. 

Get in touch

Complete the form below and we'll get back to you as soon as we can.