Mortgage experts advise how first-time buyers can ‘get ahead’ in the tough property market

The dream of owning a home seems to be fading for potential first-time buyers due to the affordability crunch. A recent Barclays survey revealed that only 22 percent of people aged between 18 and 34 believe that owning a home is a feasible goal.

Meanwhile, Santander’s customer data from Q1 2024 shows that one in five people taking their first step onto the property ladder are over 40 years old.

In an indication that more people are starting families before becoming homeowners, Santander found that one in five first-time buyers in 2023 had at least one dependent, a significant increase from 10 percent in 2009.

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David Hollingworth, Associate Director of Communications at L&C Mortgages, commented: “Nothing seems to get easier for first-time buyers and the twin challenges of deposit and affordability remain. House prices have remained stubbornly high despite a slower market, which means saving a deposit and being able to borrow enough is tough.

“Nonetheless the demand from aspiring first-time buyers is still strong despite the higher interest rates now in play. Rents have risen rapidly as well and that coupled with limited security that renting gives means first-time buyers are still keen to take the first step onto the ladder.” He added that the mortgage market remains competitive, with various deals aimed at assisting first-time buyers.

Skipton Building Society is making strides with its “track record” mortgage, which acknowledges a borrower’s rental payments when considering them for up to 100% of the property’s purchase price.

Yorkshire Building Society is stepping up too, offering mortgages that require just a £5,000 deposit. Andrew Hollingworth, a mortgage expert, suggests that such initiatives could be a game-changer for those struggling to save for a deposit amid high rent costs.

He also stresses the importance of checking eligibility criteria when shopping around for mortgages. For instance, Yorkshire Building Society’s offer doesn’t extend to flats or new-build houses.

Hollingworth points out: “The majority of deals will require a minimum (deposit) of 5 percent and it’s still the case that a bigger deposit will help to broaden the range of options and the rates on offer.”

Parental contributions remain crucial for many first-time buyers, a fact that hasn’t escaped lenders’ notice. Barclays, for example, has introduced the family springboard mortgage, allowing for 100 percent borrowing with the support of a family member or friend’s cash as security.

This money is placed into a savings account linked to the mortgage and can be returned later, adhering to specific terms and conditions. “Many will also allow a parent to be joint on the mortgage to boost the amount of borrowing available without insisting on them being a joint owner,” Andrew adds. However, not everyone has the luxury of financial backing from family.

The Lifetime Isa remains a viable choice for those aiming to bolster their savings in preparation for purchasing their first property, offering a bonus on accumulated funds.

Barclays’ research has revealed that nearly one in five young adults, around 19 percent, have concerns that acquiring a property could result in mortgage repayments extending into their retirement years.

Tim Bannister, Rightmove’s property specialist, commented: “Stretching to a longer mortgage term will increase the overall cost of the mortgage due to higher interest payments, but for many, the reduction in monthly payments can be the difference between being able to afford the home that they want or not.”

Recent data from UK Finance, the industry association, indicates that about 21% of new first-time buyers opted for mortgage terms exceeding 35 years during this year’s initial quarter.

Mortgage lenders conduct thorough checks to ensure borrowers can manage their mortgage payments, even when the loan period may extend into their retirement.

Although extended mortgage terms can make regular payments more manageable, they might also impact the amount individuals can allocate towards other expenses, including pension contributions.

Richard Donnell, executive director at Zoopla, observed: “The big trend in recent years is to borrow for over 30 years to get that extra 5-10% of buying power but at the cost of paying more interest over the life of the loan.” He advises that prospective first-time buyers should concentrate on identifying areas where they can obtain better value for their money.

Some potential purchasers might consider renting in an area before buying a property, to get a feel for the location, as Donnell explains: “We have seen some increase in first-time buyers looking to buy flats in the face of higher mortgage costs but most first-time buyers still want to buy a three-bed house to do up and add value to.”

The property expert went on to highlight the importance of tapping into the knowledge of local estate agents: “One big piece of advice is to speak to estate agents who know the local area well.”

“The rise of online property searching means buyers aren’t tapping into the knowledge of property professionals. Agents can help with the ‘if you can’t afford here, people tend to look there’ on-the-ground insight.”

He added: “Building a rapport with an agent can help you to get ahead in your search and gain some great tips.” Donnell also advises prospective buyers to have a mortgage in principle agreed before viewing properties so they know exactly how much they can borrow.

He recommended checking your credit score with all of the main ratings providers, to make sure you’re in the best possible position to get a mortgage.

Prospective buyers might also want to consider using a service such as Experian Boost, which lets users share extra information about their financial habits which, Donnell says, may help to improve their credit score.

Donnell also suggests that when searching for a property, buyers should consider the price per square foot or metre, as: “At the end of the day you are buying space.”

Emily Williams, director of research at property firm Savills, says that people are still keen to buy their first home. She states: “Our latest survey of first-time buyers active in the new homes sector revealed that 75% said recent market conditions had led them to compromise on location, while 41% of first-time buyers said they had made a significant compromise on size.”

First-time buyers and existing homeowners looking to remortgage are hoping that the Bank of England base rate will be cut soon. This should make mortgage rates cheaper.

With a general election on July 4, political parties are making various pledges to first-time buyers. “With an interest rate cut on the horizon, major lenders should be able to provide some relief to those looking to get onto the ladder,” Williams adds.