Finance

Better late than never

House prices

Steep increases in house prices have meant that many people are now buying their first homes later in life. Kay Hill looks at the phenomenon and considers how to buck the trend

Fifty years ago, the average age of a British house buyer was just 23; now in parts of the country buyers are likely to be in their mid-30s before they are able to purchase a property and, even in the most affordable areas, the average age is 27.

Of course, social changes have played a big part in this. In the 1960s, most people left school at 15, with only 7% staying on for A-levels and less than 4% attending university. Today, around 40% take A-levels and more than 30% go on to university. Add in the fact that the average age of marriage has increased from 22 to 30 in that time, and it’s fairly obvious that both job security and the desire to take on a mortgage has been put back by several years.

However, by far the biggest factor in this shift has been the sheer cost of getting on the housing ladder – it is not a coincidence that there is a strong correlation between house prices, earnings and buyer ages. A new report by Halifax, for example, reveals that, while across the country the average age of first time buyers is 30, this varies dramatically; from 27 years old in Carlisle in the North West and Torfaen in Wales, up to 34 years old in nine areas of London and the South East.

Housing affordability in an area can be measured by how many multiples of the average local annual salary you would need to buy the average local house. In the UK as a whole, this ratio is 5.8, but in Torfaen it is just 4.1. At the other end of the scale, in the areas with the highest first time buyer age of 34 the ratio stretches from 6.7 in Hastings and 7.4 in Windsor,
up to an eye-watering 10.6 in Ealing.

Demand for home ownership is as healthy as ever – a YouGov poll of 2,000 adults for the Council of Mortgage Lenders found that 80% wanted to be homeowners within 10 years – but there is a real fear of missing the boat. Research by comparethemarket.com found that, while two thirds of non-homeowners were confident that they would one day be owner occupiers, among those who had reached the age of 45, only a third still believed they could achieve that dream.

So, what practical steps might you take to ensure that you aren’t still paying off your mortgage when you’re drawing your pension?

Relocate: It may not be possible for everyone, but if you aren’t irrevocably tied to an area by your job or family commitments, then why not consider moving somewhere with a lower salary
to house price ratio? You might not get such a big wage packet as you would in the City, but when you can buy a home for less than three times the average salary in parts of Scotland and Cumbria and less than four times in areas of northern England and Wales, it is definitely worth going to take a look.
Join forces: So you haven’t met Mr Right yet? You don’t need to be partnered, or married to buy a property – many mortgage companies will consider applications from small groups of friends, or siblings, who want to help each other get on to the property ladder. Make sure you get professional legal advice though.
Increase income: The more you can earn, the quicker that deposit will mount up, so consider if you could take on overtime, or a part-time job, to supplement your main income. Don’t forget that, from April, there are two new tax allowances for Trading and Property income of £1,000 each, so you can earn a bit extra, tax free.
Maximise savings: Can you cut back on your expenditure to put more aside? From little things like making your own packed lunch right up to moving back in with mum and dad to cut down on rent, every pound saved is a step closer to your goal. Also, make sure you are earning the best return on your deposit savings.
Mortgage options: With house prices still increasing rapidly, if all that’s standing between you and your dream home is not enough deposit, or a slightly too low income, you might want to consider your mortgage options. While you will pay a higher interest rate for a high loan-to-value mortgage, and more overall for a longer than average 30- or 35-year mortgage term, if the alternative is being forever priced out of the market, it might be a price worth paying.

 The problem in figures

  • The average age of a first time buyer in the early 1960s was 23, whereas most people saving for a house today expect to be 35 before they will actually purchase. Source – Post Office Mortgages
  • The national average age of a first time buyer is 30 – the youngest first-time buyers are 27 in Carlisle in Cumbria and Torfaen in south Wales, while the oldest average first time buyers are aged 34 in Slough and parts of London. Source – Halifax
  • The proportion of 25- to 34-year-olds who are owner-occupiers has fallen from 59% to just 36% in the past 10 years. Source – Property Millionaires: The Growing Housing Divide, report for Santander
  • In 1991, 65% of 25- to 34-year-olds in England who were household heads had bought their own home. By 2012 that figure had declined to 45%, while among 35- to 44-year-olds it was down from 80% to 65%. In the 1980s, one in three household heads aged 16-24 could afford to buy their own home, compared to just one in 10 today. Source – Office of National Statistics
  • Just 26% of those currently aged 20-39 will own their own home by 2025, whereas 64% of those born in the 1960s owned a house by the time they were 35. Source – PwC
  • A survey of 2,200 adults who had never owned a home found that a third believed they would never own a property, rising to two thirds amongst 45- to 54-year-olds.
    Source – comparethemarket.com
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