There are a million first time buyers who are delaying home purchases due to mortgage rates and the cost of living

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.

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.

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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.

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.

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.”