A new study by Aviva finds that a cost-of-living crisis has forced more than a million optimistic first-time buyers under the age of 45 to put their plans on hold.
One in five of those surveyed said the cost of living crisis and inflation make buying a home unaffordable.
The survey, which focused on those under 45 and those who have never owned a property, found that just under half (46 per cent) are not currently looking to buy but intend to do so in the future, with a further 16 per cent saying they do not intend to buy . to do that.
Knocked off the ladder: First-time buyers unable to jump onto the property ladder due to soaring inflation and foreclosure, according to survey by Aviva
The survey also suggested that those who are still planning to buy may underestimate the cost of their mortgage, as interest rates have increased in the past few months.
Those intending to buy or in the process of buying their first property can expect to take out a mortgage of £196,700 on average, and expect to deposit £25,210.
Based on these figures, they say they should expect a monthly mortgage payment of £718.60.
However, when those numbers were put into an online mortgage calculator for the High Street building community this week, the results showed they would pay £1,103.86 per month on a two-year fixed deal, or £928.07 per month on a two-year basic rate tracker. .
This means that buyers may underestimate mortgage costs by up to 54 percent.
>> Check out the latest mortgage rates you can apply for with our calculator
First time buyers face an uphill battle in the current circumstances. Mortgage rates have risen rapidly over the past year while home prices are set to drop in the near future.
The two-year average fix peaked at 6.65 percent on Oct. 20, according to Moneyfacts.
While that has fallen in the past two weeks and now stands at 6.22 percent, it is still well above the usual rate before the ill-fated mini-budget on September 23 which was 4.74 percent.
This time last year, the average transaction cost was 2.29 per cent, which means homebuyers who get a new mortgage today could pay hundreds of pounds more each month than those who fixed it last year.
However, there is some good news as prices slowly start to fall. Last week, the average cost of two-year fixed-rate deals across all loan classes fell to value each day, according to Moneyfacts.
This week, Santander announced that it is cutting all residential mortgage rates by up to 0.45 percent. The bank said in a note to brokers that all residential tracker prices have also been slashed by up to 1.25 percent.
“I think that as lenders look to meet their lending requirements, there’s every chance we’ll see more competition for what mainstream lenders consider to be better borrowers with good credit profiles and strong jobs, leading to to lower LTV rates.
“It certainly looks as if we can see the light at the end of the tunnel now, the dust is starting to settle after the mini-budget debacle.”
On top of rising mortgage costs, first-time buyers fear falling home prices, which increases the risk of running into negative equity for those buying with small deposits.
Mortgage rates are starting to fall after a sharp rise last month in the wake of the mini budget
Delayed purchase ‘may affect later life finances’
Delaying buying a home today could have a lifelong impact on young people’s finances, said Matt McGill, managing director at Aviva Equity Release.
This is because many people rely on stocks from their homes to provide them with funds later in life.
“The cost-of-living crisis, and other factors that have driven up inflation and interest rates, have put pressure on people juggling competing financial demands,” McGill said.
The events of the past few months have created uncertainty. No one can predict the forecast for the coming months with any confidence.
Despite the resilience of housing market activity, rising mortgage rates now seem to be discouraging many from taking that all-important first step on the real estate ladder. In the coming years, this will have an indirect impact on today’s youth.
Wealth held in property contributes significantly to a person’s overall assets and can be used as a valuable source of money, particularly later in life. In the event of any adjustment in the real estate market, people’s most valuable assets would still be their homes.
Mother and Father Bank: 16% of respondents said they expected a gift or loan from the family to help with the costs of buying a home
Increasing pressure from first-time buyers has highlighted the role of intergenerational wealth in helping young people get onto the housing ladder.
Across the study, 12 percent of respondents said they expected a gift or loan from parents to help cover their costs, and 4 percent said they expected the same from grandparents.
Contributions are generally more generous than grandparents. On average, they contribute £18,850 with a gift and £16,990 in loan, compared to £17,730 and £14,130 respectively from the parents.
If this level of gifting or lending were seen across the first time buyer market, this would represent over £23 billion in first time buyer costs provided by family of buyers.
Adds McGill: “The amount of support offered or intended by different generations of the family for first-time buyers is significant. We have seen this trend, particularly for grandparents providing financing, increase in recent years.
“Family members are more and more willing to use the wealth they have accumulated in the property over the years to provide young people with a footing in the property ladder.”
What to do if you need a mortgage
Borrowers who need to find a mortgage because their existing fixed-rate deal is coming to an end, or because they have agreed to buy a home, have been urged to act but not to panic, Writing this is Money Editor Simon Lambert.
Banks and building societies are still lending and mortgages are still being accepted with applications accepted.
However, rates change quickly, and there is no guarantee that deals will stick and won’t be replaced by mortgages that charge higher rates.
This is Money’s best mortgage rate calculator powered by L&C that can show you deals that match the value of your mortgage and property.
What if I need to re-travel?
Borrowers should compare rates, talk to a mortgage broker, and be prepared to work to secure a rate.
Anyone with a fixed-rate deal that expires within the next six to nine months should consider how much a remortgage will cost now — and consider a new deal.
Most mortgage deals allow a fee to be added to the loan and then only charged when you take it out. By doing this, borrowers can secure a rate without paying expensive arrangement fees.
What if I’m buying a house?
Those who have agreed to buy homes should also aim to lock in prices as early as possible, so they know exactly what their monthly payments will be.
Homebuyers should beware of overexerting themselves and be prepared for the possibility of home prices falling from their current high levels, due to high mortgage rates limiting people’s ability to borrow.
How to compare mortgage costs
The best way to compare mortgage costs and find the right deal for you is to talk to a good broker.
L&C Mortgage Broker Partner at Money told me that mortgages are still available and you can use the best mortgage rates calculator to show deals matching your home value, mortgage size, term needs and flat rates.
Be aware that rates can change quickly, so the advice is that if you need a mortgage to compare rates then speak to a broker as soon as possible, so they can help you find the right mortgage for you.
> Check out the best fixed rate mortgages you can apply for
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