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For many millennials, buying a first home has felt increasingly out of reach. House prices have risen much faster than incomes, deposits have become harder to save, and higher mortgage rates have placed further pressure on affordability.
However, there are signs that conditions may finally be beginning to improve.
Why has buying a home become so difficult?
Home ownership among younger adults has fallen significantly over recent decades. By the age of 28, around 27% of people born between 1991 and 1995 owned a home, compared with approximately 47% of those born between 1961 and 1965.
One of the main reasons is that property prices have consistently outpaced earnings. While wages have increased, they have not kept pace with the cost of buying a home—particularly across London, Essex and the wider South East.
A shortage of new housing has also contributed. England is estimated to need around 300,000 additional homes each year, but approximately 208,000 were added during the most recent year.
Higher land prices, construction costs, skills shortages and delays within the planning system have all made it more difficult and expensive for developers to deliver new homes.
The deposit remains the biggest obstacle
Even where prospective buyers can comfortably afford monthly mortgage payments, saving the deposit can be challenging—especially while paying private rent.
The average 10% first-time buyer deposit varies considerably by location. Nationwide figures suggest that buyers may need approximately:
- £44,800 in London
- £32,800 in outer metropolitan areas
- £26,300 in the outer South East
- £21,200 in East Anglia
For many renters, housing costs absorb around a third of their income. This helps explain why more younger adults are remaining with their parents for longer while building their savings.
Are conditions beginning to improve?
There are some encouraging signs.
In recent years, wage growth has generally been stronger than house-price growth. As a result, the average house-price-to-income ratio has reduced from almost nine times earnings in 2021 to approximately 7.6 times today.
Mortgage lenders have also introduced more flexible products, including:
- Mortgages requiring deposits as low as 5%
- Higher income multiples for qualifying borrowers
- Repayment terms of up to 40 years
- Products specifically aimed at first-time buyers
Interest rates have also fallen from their recent peak. Nationwide estimates indicate that typical first-time buyer mortgage repayments now account for around 32% of take-home pay, compared with approximately 45% in 2007.
This remains slightly above the long-term average of around 30%, but the direction of travel is more positive.
Buyers should still proceed carefully
Smaller deposits and longer mortgage terms can make buying possible sooner, but they come with additional risks.
A 95% mortgage leaves the buyer with relatively little equity. If property prices fall, there is a greater risk of negative equity, particularly during the first few years of ownership.
Longer mortgage terms can reduce monthly payments, but the borrower is likely to pay considerably more interest over the lifetime of the loan.
Buyers should therefore consider the overall cost of borrowing, not simply whether the initial monthly payment appears affordable.
Don’t allow affordability pressures to encourage shortcuts
When savings have been stretched by the deposit, mortgage fees and moving costs, it can be tempting to reduce spending elsewhere. However, buying a property without an appropriate survey can expose a first-time buyer to repair costs they have not budgeted for.
Problems with roofs, damp, drainage, structural movement, outdated services or unauthorised alterations may not be obvious during a standard viewing or mortgage valuation.
An independent home survey can help you understand the property’s condition before you become legally committed. It may also provide useful evidence when renegotiating the purchase price or asking the seller to complete repairs.
Is the market turning a corner?
Buying a first home remains more difficult than it was for many previous generations. Deposits are still substantial, property prices remain high in relation to earnings, and the supply of new homes continues to fall short of demand.
Nevertheless, slower house-price growth, improving wages, lower mortgage rates and more flexible lending could give some first-time buyers a better opportunity to step onto the property ladder.
The market has not suddenly become easy—but for buyers who prepare carefully, understand their finances and investigate the property properly, it may finally be moving in a more encouraging direction.
Buying your first home?
Ashton Lee Surveyors provides independent Level 2 and Level 3 home surveys throughout Essex, London and the surrounding areas.
Our detailed reports use clear language, photographs and practical recommendations to help you understand what you are buying before you commit.
Request your personalised quotation at ashtonlee.co.uk/survey-quote.
