You are here: Home - Uncategorized -

First-timers ‘won’t benefit from house price falls or stamp duty cut’

0
Written by: Samantha Partington
13/08/2020
First-time buyers facing lower income and tighter lending rules will miss out on the chance to cash in on falling house prices, according to analysis by the Resolution Foundation.

The combination of rising unemployment, less take home pay and lower interest rates meant the Office for Budget Responsibility’s pessimistic forecast of a sharp 22% drop in house prices by Q3 2021 was realistic.

But even with such a steep fall in house prices, the think tank warned that first-time buyers, in receipt of less income, would still struggle to afford a home.

For example, in the 1990s a young couple saving 5% of their income each year could have a deposit in four years, according to the report. But by 2019, that figure had risen to 21 years.

If house prices fell by 22%, first-time buyers would only be able to shave one year off the time it would take them to save for a house.

And while some households have managed to save more during lockdown, the foundation found that coming into the crisis, just 13% of private renters aged 24-35 years had savings of £10,000.

Moreover, a quarter of private renters have been forced to dig into their savings since the pandemic began.

The think tank also warned that if banks and mortgage lenders repeated their response to the financial crisis by introducing tighter credit conditions, this could have a serious impact on fledgling buyers.

Quarter of a century for a deposit

According to its estimate, if the average first-time buyer loan-to-value fell to 80%, as it did after the financial crisis, by 2024 the typical number of years required to save for a deposit would rise to 27 even if house prices fell by 22%.

Although the stamp duty cut appears to remove a barrier to home ownership, as most first-time buyers were already exempt from the tax it has taken away their advantage and created more competition, according to the findings.

Lindsay Judge, research and policy analyst at the Resolution Foundation, said: “The coronavirus crisis has had a big impact on the education, career prospects and incomes of young people – and unfortunately there’s no silver lining for this group when it comes to house prices.

“Only those who already had high levels of savings before the pandemic started, or those who are able to borrow from their family, will truly benefit from the house price fall.

“This means the current crisis looks set to deepen pre-existing inequalities and the growing divide between those who are able to look forward to home ownership, and those for whom this dream is increasingly out of reach.”

The foundation wants the government to ensure that young peoples’ incomes are protected in the aftermath of the coronavirus crisis, and that their competitive advantage as first-time buyers is maintained when the stamp duty holiday comes to an end.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

The savings accounts paying the most interest

If one of your jobs this month is to get your finances in order, moving your savings to a higher paying deal i...

Coronavirus and your finances: what help can you get?

News and updates on everything to do with coronavirus and your personal finances.

Everything you need to know about being furloughed

If you’ve been ‘furloughed’ by your company, here’s what it means…

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week

Privacy Preference Center

Necessary

Advertising

Analytics

Other

Read previous post:
Five million people suffer broadband outage in last year

Nearly five million people suffered a broadband outage lasting more than three hours in the past year. Here are your...

Close