One million first-time buyers delay home buying due to mortgage rates and cost of living

The cost-of-living crisis has forced more than a million hopeful first-time buyers under the age of 45 to put their plans on hold, a new Aviva survey has found.

One in five of those surveyed said the cost-of-living crisis and inflation were making buying a home unaffordable.

The survey, focused on people under 45 who had never owned a property, found that just under half (46 percent) were not currently looking to buy but intended to in the future, and another 16 percent He said he had no intention of buying it. doing it.

Kept off the ladder: First-time buyers can’t make the jump onto the property ladder due to rising inflation and mortgage rates, according to an Aviva survey

The survey also suggested that those still planning to buy may be underestimating the cost of a mortgage, as interest rates have skyrocketed in recent months.

Those who intended to buy or were in the process of buying their first property expected to get a mortgage of £196,700 on average and anticipated making a deposit of £25,210.

Based on these figures, they say they expect a monthly mortgage payment of £718.60.

However, when these figures were put into an online mortgage calculator from the Highway Building Society this week, the results showed they would pay £1,103.86 per month on a two-year fixed deal, or £928.07 per month on a tracker. two-year base rate. .

It means buyers could be underestimating their mortgage costs by as much as 54 percent.

>> Check the latest mortgage rates you could apply for using our calculator

First-time buyers face an uphill battle under current conditions. Mortgage rates have risen rapidly over the past year, while house prices will fall in the near future.

The two-year average correction peaked at 6.65 percent on Oct. 20, according to Moneyfacts.

While that has decreased in the past two weeks and now stands at 6.22 percent, it is still much higher than the typical rate before the ill-fated Sept. 23 mini-budget, which was 4.74 percent.

At this time last year, the average deal was charging 2.29 per cent, meaning homebuyers taking out a new mortgage today could be paying hundreds of pounds more each month compared to what they locked in last year.

However, there is some good news as rates slowly start to fall. Last week, the average cost of two-year fixed-rate transactions across all loan-to-value tranches fell every day, according to Moneyfacts.

This week, Santander announced that it would reduce all its residential mortgage rates by up to 0.45 percent. All residential tracker fees have also been cut by as much as 1.25 percent, the lender said in a note to brokers.

Lewis Shaw, Mortgage Consultant and Owner of Riverside Mortgages, said: “I think that as lenders look to meet their credit requirements, there is a good chance that we will see more competition for what conventional lenders perceive to be better borrowers with good credit profiles. and solid employment. reducing some lower LTV rates.

“It certainly feels like we may see the light at the end of the tunnel now that the dust is settling after the mini-Budget catastrophe.”

In addition to much higher mortgage costs, first-time homebuyers will fear falling home prices, increasing the risk of negative equity for those who buy with small deposits.

Mortgage rates have started to fall after rising sharply last month following the mini-Budget

Mortgage rates have started to fall after rising sharply last month following the mini-Budget

Delaying the purchase ‘could affect finances in later life’

Matt McGill, managing director of Aviva Equity Release, said delaying buying a home today could have a lifelong impact on younger people’s finances.

This is because many people rely on the equity in their home for funds later in life.

“The cost-of-living crisis and other factors resulting in inflation and higher interest rates have put pressure on people juggling competing financial demands,” McGill said.

‘The events of the last few months have created uncertainty; no one can predict with certainty the outlook for the coming months.

‘Despite resilient property market activity, it now appears that rising mortgage rates are deterring many from taking that important first step up the property ladder. In the years to come, this will have a ripple effect for today’s youth.

‘Wealth held in ownership contributes greatly to someone’s overall assets and can be used as a valuable source of funds, particularly later in life. In the event of any adjustment in the real estate market, most people’s most valuable asset will continue to be their home.”

Bank of Mum and Dad: 16% of respondents said they expected a gift or loan from family to help with home buying costs

Bank of Mum and Dad: 16% of respondents said they expected a gift or loan from family to help with home buying costs

Increasing pressures for first-time homebuyers have highlighted the role of intergenerational wealth in helping young people access housing.

Across the study, 12 percent of respondents said they expected a gift or loan from parents to help cover their costs, and 4 percent said they expected the same from grandparents.

Contributions are generally more generous from grandparents. On average they provide £18,850 as a gift and £16,990 as a loan, compared to £17,730 and £14,130 respectively for parents.

If this level of gifts or loans were to be seen in the first-time buyer market, this would represent over £23 billion of first-time buyer costs provided by the buyer’s family.

McGill adds: ‘The amount of support that different generations of the family give or claim to give to first-time buyers is substantial. We have seen this trend, particularly from grandparents providing funding, increase in recent years.

“Family members are increasingly willing to use the wealth they have accumulated in property over the years to give young people a leg up on the property ladder.”

What to do if you need a mortgage

Borrowers who need to find a mortgage because their current fixed-rate agreement is coming to an end, or because they have agreed to purchase a home, have been urged to act but not panic. writes This is Money editor Simon Lambert.

Banks and building societies continue to lend and mortgages are still being offered and applications accepted.

However, rates are changing rapidly and there is no guarantee that the deals will last and not be replaced by mortgages that charge higher rates.

This is the best Money Mortgage Rate Calculator powered by L&C that can show you offers that match the value of your mortgage and property

What if I need to re-mortgage?

Borrowers should shop around and talk to a mortgage broker and be prepared to act to secure a rate.

Anyone with a fixed-rate agreement ending within the next six to nine months should consider how much it would cost to remortgage now and consider closing a new agreement.

Most mortgage deals allow fees to be added to the loan and are then only charged when you withdraw. By doing this, borrowers can lock in a rate without paying expensive setup fees.

What if I am buying a house?

Those with agreed home purchases should also aim to lock in rates as soon as possible, so they know exactly what their monthly payments will be.

Homebuyers should be careful not to overstretch themselves and be prepared for the possibility of house prices falling from their current high levels, due to higher mortgage rates limiting people’s borrowing capacity.

How to Compare Mortgage Costs

The best way to compare mortgage costs and find the deal that’s right for you is to talk to a good broker.

This is Money’s mortgage broker partner, L&C, he told me the mortgages are still available and you can use our best mortgage rate calculator to show you offers that match your home value, mortgage size, term and fixed rate needs.

Keep in mind, however, that rates can change quickly, so the advice is if you need a mortgage, compare rates and then speak to a broker as soon as possible, so they can help you find the right mortgage for you. .

> Consult the best fixed-rate mortgages that you could apply for

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