First time buyers shelve plans - so rental demand to stay high

A new survey from Aviva has revealed that over a million people may rule themselves out of the first-time buyer market, due to pressures caused by the cost of living crisis. 

The survey, focused on under 45s who have never owned a property, identified that just under half of those asked were not currently house-hunting, but intend to in future, with a further 16 per cent saying they have no intention of doing so. Of these, a fifth specifically cited the cost-of-living crisis and inflation as making buying a house unaffordable.

The survey also shows the cost of a mortgage is being substantially underestimated, with the potential to dissuade more people from moving onto the property ladder. 

Across the country and all age groups, survey respondents intending to buy or in the process of buying their first property say they expect to pay £196,700 on average and anticipate putting down £25,210 as their deposit. Based on these figures, they say they are expecting a monthly mortgage payment of £718.60.

However, when these figures were put into a high street building society online mortgage calculator by Aviva, the results show you would be paying £1,103.86 per month on a two-year fixed deal, or £928.07 monthly on a two year base rate tracker, an underestimation of up to 54 per cent.  

The role of intergenerational giving remains as important as ever for helping cash-strapped first-time buyers. 

Across the study, 12 per cent of respondents said they were expecting a gift or loan from parents to help meet their costs, and four per cent said they expect the same from grandparents. This expectation is higher among the youngest age group (18 – 24), with 15 per cent saying their parents, and six per cent saying grandparents, would help them. 

Individual contributions are more generous from grandparents – typically they contribute a gift of £18,850, and £16,990 as a loan, compared with £17,730 and £14,130 respectively from parents. 

If this level of gifting or loaning were seen across the first-time buyer market, this would represent more than £23 billion of first-time buyer costs being provided by the buyer’s family.

An Aviva spokesperson says: “The amount of support being given or intended by different generations of the family to first-time buyers is substantial. We have seen this trend, particularly of grandparents providing funding, increase in recent years. Family members are more and more willing to use wealth they have accumulated in property over the years to provide younger people with a leg up onto the property ladder.”