A million first-time buyers delay house purchases due to mortgage rates and cost of living

The cost-of-living crisis has forced more than a million hopefuls under the age of 45 to shelve their plans, a new survey from Aviva finds.

One in five respondents said the cost-of-living crisis and inflation made buying a home unaffordable.

The survey, which targeted young people under the age of 45 who had never owned a home before, found that just under half (46 per cent) were not currently looking to buy but planned to do so in the future, and another 16 percent said they had no intention of doing so.

The research also suggested that those still planning to buy may be underestimating the cost of a mortgage as interest rates have skyrocketed in recent months.

Those planning to buy or in the process of buying their first home expected to take out an average mortgage of £196,700, and expected a down payment of £25,210.

Based on these numbers, they say they expect a monthly mortgage payment of £718.60.

However, when these figures were entered into an online mortgage calculator from a high street building society this week, the results showed they would pay £1,103.86 a month for a two-year fixed deal, or £928.07 a month for a two-year base rate tracker .

It means that buyers can underestimate their mortgage costs by up to 54 percent.

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New buyers face an uphill battle under the current circumstances. Mortgage rates have risen rapidly in the past year, while house prices will fall in the near future.

According to Moneyfacts, the two-year average fix peaked at 6.65 percent on Oct. 20.

While that has fallen in recent weeks and now stands at 6.22 percent, it’s still much higher than the usual rate before the ill-fated mini-budget on September 23, which was 4.74 percent.

At this time last year, the average deal cost 2.29 per cent, meaning homebuyers who take out a new mortgage today could pay hundreds of pounds more each month compared to those who were locked in last year.

However, there is good news as rates slowly begin to fall. Last week, according to Moneyfacts, the average cost of two-year fixed-rate agreements across all loan-to-value brackets fell every day.

This week Santander announced it would cut all its residential mortgage rates by up to 0.45 percent. All residential tracker rates have also been reduced by up to 1.25 percent, the lender said in a note to brokers.

Lewis Shaw, mortgage advisor and owner at Riverside Mortgages, said: ‘I think as lenders look to meet their lending needs, there’s a good chance we’ll see more competition for what mainstream lenders see as better borrowers with good credit profiles and solid employment. driving down some lower LTV rates.

“It certainly feels like we can see the light at the end of the tunnel now that the dust has settled after the mini-Budget disaster.”

On top of much higher mortgage costs, first-time buyers will fear falling house prices, increasing the risk of negative equity for those buying with small deposits.

Postponement of purchase ‘may have consequences for later life finances’

Matt McGill, managing director of Aviva Equity Release, said delaying a home purchase today could have a lifelong impact on young people’s finances.

This is because many people rely on home equity to provide them with money later in life.

“The cost-of-living crisis and other factors that have led to higher inflation and interest rates have pressured people to juggle competing financial demands,” McGill said.

‘The events of the past few months have created uncertainty; no one can predict with any confidence the prospects for the coming months.

“Despite the resilient activity in the housing market, it now appears that rising mortgage rates are preventing many from taking that important first step up the real estate ladder. In years to come, this will have a domino effect on today’s younger people.

Wealth in real estate contributes greatly to one’s total wealth and can be used as a valuable source of money, especially in later life. If the real estate market changes, most people’s most valuable asset will still be their home.’

The increasing pressure on first-time buyers has highlighted the role of intergenerational wealth in helping young people get up the housing ladder.

Across the entire survey, 12 percent of respondents said they expected a gift or loan from parents to cover their expenses, and 4 percent said they expected the same from grandparents.

Contributions are generally more generous from grandparents. On average, they give £18,850 and £16,990 as a loan, compared to £17,730 and £14,130 respectively from parents.

If this level of gifting or lending were seen across the starter market, it would represent more than £23 billion of starter costs paid by the buyer’s family.

McGill adds: ‘The amount of support given by different generations of the family or aimed at first-time buyers is significant. We see this trend, especially of grandparents providing money, increasing in recent years.

“Family members are increasingly willing to use the wealth they’ve built up over the years in real estate to help younger people move up the real estate ladder.”