Can First Time Buyers Successfully Balance Homeownership Aspirations with Long-Term Stability

The idea of homeownership is widely shared among younger borrowers. The 'black and white' nature of homeownership resembled purchasing a property in your early twenties, making regular payments, with the property mortgage debt cleared by the time you head into retirement. But we continue to see the cost of property rise, illustrated with ONS data, highlighting the average UK house price increased by between 2013-2023.

Not only is price rising effecting accessibility, but unexpected economic events may also impact prospective borrowers' plans. Since the turn of the decade, we have seen pandemics, rampant inflation, wars, and frequent shifting of the head of the UK government, and it has only been four years! All of which have had a direct impact on levels of borrowing, ability to repay bills and aspiration of property ownership and how it may affect financial plans for many borrowers.

A third of first-time buyers in 2023 were aged over 35 - 20% aged 35-44, and 13% aged over 45. Within the last three years, there has been a growing tendency among homebuyers aged 30 to 39 which accounted for 30,943 new mortgage extending beyond the pension age. However, in contrast, the number of long-term mortgages for all other age groups, from 40 upwards, decreased between 2001 to 2023.

Let us explore several factors that may be affecting younger first-time buyers as they think about homeownership. 

1: Rising housing prices

Firstly, rising housing prices makes it challenging for first-time buyers to enter the market. Our goal is to assist prospective homeowners by offering diverse options such as higher loan-to-value ratios (LTVs), Right to Buy (RTB) programs, and shared ownership (SO) options.

West One aim to develop products that meet the needs of the population as we recognise borrower needs differ person-person. We understand there maybe salary challenges, and the need to use overtime, bonus, second incomes etc. By providing generous LTIs, lending over long term to ease affordability to support borrowers, West One continuously look at the challenges for borrowers who consider specialist lending, but recognising mainstream borrowers may require lending outside of the high-street.

2: Debt Consolidation

The age group of first-time buyers may also encounter debt issues before they look at homeownership. Recent reports indicate that individuals aged 35-44 are significantly more likely to be in debt, with 80% of 25-34-year-olds affected, compared to just 18% of those aged 75 and over. Although young people are increasingly finding themselves in debt and facing difficulties in securing property, West One understands the challenges impaired credit holds.

Instead, West One provides tailored financial solutions and flexible lending options ideal for borrowers who have less than a perfect credit score.

The economic difficulties experienced in recent years has led to a growing rate in individuals looking to debt consolidation as part of their mortgage option. As of June 2024, West One can provide capital raising for debt consolidation available up to 90% LTV and will satisfy the debts directly with the credit providers on completion of the mortgage.

At West One, we understand that financial difficulties can occur to anyone, regardless of their credit score. That's why West One do not rely on credit scoring to assess each case. We believe in evaluating every borrower's situation on it's own merits, considering their unique circumstances.

3: First-time buyers

Additionally, it is common for younger borrowers to be first-time buyers, which may present a challenge to afford mortgage repayments and find the necessary deposit funds. Currently growth in house prices has outpaced the growth in earnings for a significant period. On average, around half of first-time buyers in their 20s are typically getting help of an average of £25,000 from their parents.

West One recognises the difficulties face by first-time buyers and aids in overcoming these affordability challenges. West One provides flexible lending solutions by offering up to 90% LTV, including First Time buyers, access to higher LTIs, and access to multiple product options. We also allow gifted deposit funds from immediate family members to be used.

The higher LTI product options could provide possibilities where borrowers don't have equity in an existing property they can utilise, or salaries are at the lower end of what is required. The LTI 'Boost' option, means borrowers can achieve uncapped LTI's in excess of 5x via West One which includes options for First Time buyers.

4: Home ownership as retirement plan?

There are existing plans to increase the state pension age from 66-67, with projections for it to reach 71 by 2050.

As the state pension age increases, borrowers may use property ownership as a retirement plan. Owning a property allows individuals to build equity, offers stability and control, and can be viewed as a long-term investment towards their retirement. Some individuals view homeownership itself as a form of investment and rely on the potential appreciation in property value as a means of funding their retirement.

This strategy may carry inherent risks since real estate markets are subject to fluctuations and there is no guarantee that housing prices will consistently rise overtime. It is also important to carefully assess affordability and consider balancing homeownership aspirations with pension savings goals through careful financial planning.

Giving these trends it is crucial that young borrowers carefully evaluate their options when approaching mortgages while also prioritising responsible planning for retirement.

West One can help younger and First-Time buyers enter property market by offering flexible eligibility criteria, overcoming barriers like imperfect credit history and lower incomes. Our personalised mortgage solutions for borrowers past retirement age empowering individuals to make informed decisions about their finances.