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First Time Buyer

More than a million first-time buyers put off purchase by cost-of-living crisis

Nick Cheek
Written By:
Nick Cheek
Posted:
Updated:
22/11/2022

More than a million Brits under the age of 45 could rule themselves out of the first-time buyer market as the cost of living bites. Meanwhile, the bank of mum and dad continues to expand.

A survey from insurance giant Aviva has revealed that just under half (46%) of those asked were not currently house-hunting, but intend to in the future, with a further 16% saying they have no intention of doing so.

Of these, one in five cited the cost-of-living crisis and inflation as making buying a house unaffordable.

The insurer noted that on a nationally representative scale, it would equate to more than a million people under 45 being forced to shelve plans to get on the housing ladder.

Mortgage costs severely underestimated

The survey also revealed that the cost of a mortgage is being underestimated, with the potential to dissuade more people from becoming first-time buyers.

Those intending to buy or in the process of buying their first property said they expect to pay £196,700 on average and anticipate putting down £25,210 as their deposit. Respondents expected to have monthly mortgage payments of £718.60.

However, when Aviva calculated these figures using average rates, the results showed buyers would be paying £1,103.86 per month on a two-year fixed deal, or £928.07 monthly on a two-year base rate tracker, an underestimation of up to 54%.

Matt McGill, MD of Aviva Equity Release, said: “The cost-of-living crisis, and other factors resulting in higher inflation and interest rates, have put pressure on people juggling competing financial demands. Events of the past few months have created uncertainty; nobody can predict the outlook for the coming months with any confidence.

“Despite resilient housing market activity, it now appears rising mortgage rates are dissuading many from taking that important first step onto the property ladder. In years to come, this will have a knock-on effect for younger people today.”

Bank of mum and dad expands to bank of granny and granddad

The survey also found that the role of intergenerational giving remains as important as ever for helping cash-strapped first-time buyers. Across the study, 12% of respondents said they were expecting a gift or loan from parents to help meet their costs, and 4% said they expect the same from grandparents. This expectation is higher among the youngest age group (18 – 24), with 15% saying their parents, and 6% saying grandparents, would help them.

Individual contributions are more generous from grandparents – typically they contribute a gift of £18,850, and £16,990 as a loan, compared with £17,730 and £14,130 respectively from parents.

If this level of gifting or loaning were seen across the first-time buyer market, this would represent more than £23bn of first-time buyer costs being provided by the buyer’s family.

McGill said: “The amount of support being given or intended by different generations of the family to first-time buyers is substantial. We have seen this trend, particularly of grandparents providing funding, increase in recent years.

“Family members are more and more willing to use wealth they have accumulated in property over the years to provide younger people with a leg up onto the property ladder.”

A Savills survey from August this year found that the bank of mum and dad would lend around £25bn in the next three years.