New report shows first-time homebuyers in the UK are taking on less debt. They’re borrowing for longer periods—getting 31-year mortgages on average. This expanded mortgage term is a significant jump from the 28 year average seen a mere ten years ago. The trend illustrates the widening hurdles that newcomers to the housing market are experiencing. Not only do they feel the impact of the inflated real estate market.
In the last few months, the UK’s largest building society, Nationwide, has recorded an increase in annual house price inflation. Development property values have risen about 3.5% over the last year. The median price of a home has now hit £273,427, forcing most first-time homebuyers to turn to extended repayment periods to cope with affordability. Robert Gardner, chief economist at Nationwide, underscored that there are economic uncertainties around the globe. He stressed that the backdrop for first-time home workers in the UK is conducive.
The reality of today’s mortgage market is that lenders generally only allow mortgages with terms up to, at most, 40 years. This important flexibility enables homebuyers to acquire homes even after facing increased expenses and complicated issues in the current housing market. Though affordability has always been one of their primary concerns. As UK Finance points out, even with the fall in interest levels, the main affordability measure has not really worsened. Unfortunately, increasing house prices have rapidly wiped out any positive impact of falling mortgage payments.
Yes, first-time buyer completions were up an astonishing 113% in March! That breathtaking gain came on top of already massive gains – 66 percent – over the comparable month last year. By comparison, completions for existing homeowners similarly saw a mindblowing increase of 140% over that same span. Mortgage applications to purchase homes fell for the fourth month in a row in April, indicating a very mixed market picture.
The increase in May house prices was 0.5%. Ceilings on properties above £300,000 in England and Northern Ireland only increase the pressure for first-time buyers who have to pay stamp duty. With prices continually increasing, first-time homebuyers face extraordinary hurdles on their path to homeownership. Even a healthy housing market would be hard to maneuver in under these circumstances.
“Despite wider economic uncertainties in the global economy, underlying conditions for potential home buyers in the UK remain supportive.” – Robert Gardner, chief economist at Nationwide.
“Even as interest rates have come down, this measure of affordability has not eased significantly, with rising house prices largely offsetting any lowering of payments through falling rates.” – UK Finance’s review of household finances.
