Young professionals and their parents fear they will rent forever
Many young workers, couples and families have given up on the dream of home ownership and are resigned to renting for life, following an 18-month period of rapid house price growth across Britain.
The number of would-be buyers saving for a deposit dropped six percentage points in 2014, according to a new survey from the Halifax which has revealed that 43pc of people are currently setting aside part of their monthly income to buy a house, while 57pc are not.
House prices jumped 10.4pc in England and 17.4pc in Greater London in 2014, the Office of National Statistics reported, while wage growth remained slow and lending criteria became stricter.
These factors have deterred prospective first-time buyers in their 20s and 30s, according to the research by Halifax.
This showed a growing divide between those who want to get on the ladder and those who have written off their prospects of making it on to the first rung, with the number of tenants intending to rent for life growing from 13pc in 2011 to 16pc in 2014.
The three biggest barriers for wannabe buyers are the size of the deposit, property prices and a low income, the survey of 40,000 20-to-45-year-olds found.
With sluggish earnings growth, the average amount that non-homeowners can afford to save towards a deposit each week has only increased marginally over the last two years to £33.35. However, the amount doubles to £62.90 for those with a realistic chance of buying.
The time it takes to save for a deposit has also jumped, from an average of 3.6 years in 2011 to 5.35 years in 2014.
Fear of being turned down for a mortgage is the biggest worry for the would-be applicant and over the last five years the number of new house hunters concerned about rejection has increased by 10pc.
“Young people are worried that if they are turned down for a mortgage it will negatively impact their credit rating,” said Henry Pryor, an independent buyer. “This is what the banks need to eduate them on.”
While there has been an increase in first-time buyers – numbers fell to 192,300 in 2008 before climbing back to 311,500 last year – 2014 levels are still 22.6pc lower than in the pre-recession boom.
“There is a growing group of young people who believe they won’t be able to get a mortgage. Home ownership is never going to be the right choice for everyone but we all have a right to the opportunity,” said Craig McKinlay, mortgage director at the Halifax.
Even with government intervention in the shape of the Help to Buy shared equity and loan guarantee schemes – introduced by the Treasury in April 2013 and October 2014 respectively – and record low interest rates, the number of prospective first-time buyers who think that securing a mortgage has become more difficult has risen from 30pc in 2011 to 37pc in 2014.
The shift is more dramatic among their parents (also polled by the Halifax) with those believing it is “hard” to get a mortgage rising from 32pc to 44pc.
The Mortgage Market Review, introduced in April 2014 to ward against irresponsible lending – followed by steps in June by Mark Carney, Governor of the Bank of England, to cap the number of high loan-to-value mortgages – slowed the market in the second half of 2014, confirmed by data from the Council of Mortgage Lenders showing an 11pc drop in first-time buyer borrowing in Greater London in February.
And there’s a regional divide as London renters are more fearful that they will never get on the ladder, due to high house prices, than tenants in any other area of the country.