The economic turmoil caused by the mini-budget in September led many to brace themselves for house price and activity falls. First-time buyers (FTBs) were considered especially vulnerable as they faced significant hikes in mortgage rates. However, these falls have so far been softer than many anticipated. Why is this?

Compared to August 2022, FTBs are buying homes that are 5 per cent cheaper and paying 6 per cent more of their income on interest payments, while the average deposit has grown by 9.6 per cent. These changes are helping to limit the impact of increased debt costs, meaning that activity and prices have not yet fallen as much as might have been expected.

Adaptations in how people are securing their first property are not a new phenomenon, and have been used by FTBs for over a decade.

What changes are first-time buyers making?

In response to the average house price increasing from 6.8 times the average salary to 8.2 times between 2010 and 2023, buyers have adjusted by waiting longer to buy their first property. The average FTB age has increased by 6.8 per cent, from just under 31 to just over 33. FTBs have also had to increase the length of their mortgage term by 14.1 per cent from just under 27 years to almost 31.

FTBs are also pushing starting a family back further, perhaps until a time when they have more domestic certainty. The average age of mothers increased from 29.5 in 2010 to the record high of 30.9 in 2021, while for fathers it increased from 32.5 to 33.7.

Aspiring home buyers are also relying more on living with family members for longer. The 2021 Census data showed a substantial increase (14.7 per cent) in the number of non-dependent children living at home since 2011.

Areas with the highest affordability pressures in London and the South East witnessed the biggest increases in boomerang children. Delaying domestic independence has helped these home buyers avoid high rents eating into savings needed for a deposit.

There has also been an increasingly large role for the Bank of Mum and Dad (BOMAD), which in 2022 supported 32 per cent more transactions for FTBs than back in 2010.

How far can people adapt?

A combination of strategies helps FTBs overcome affordability issues caused by rising house prices and mortgage costs.

Everybody will have different levels of flexibility and their own limits, requiring a constantly changing set of new compromises to be made. For example, buying a property at 33 on a 30-plus-year mortgage suggests this adaptation has already stretched as far as it can before buyers are potentially paying off their loans after retirement.

Whatever the solution, it is clear that there is no end in sight for FTBs having to make lifestyle changes in order to get a foot onto the housing ladder.

Further information

Contact Toby Parsloe