First-time buyers face ever growing list of buying obstacles

Rightmove’s latest research also finds that while the deposit challenges set by lenders continue to keep first-time buyer levels muted, there are other obstacles for first-time buyers to overcome if they are to realise their ambition of owning a home, including: finding a suitable property to buy, affordability in their neighbourhood, and accessing a competitive mortgage deal.

Miles Shipside, Rightmove director and housing market analyst comments: “The list of challenges to get onto the property ladder seems to be getting longer rather than shorter. Raising enough of a deposit stubbornly remains the major concern for intending first-time buyers, but we are now also seeing how the issues facing second-steppers are affecting the fortunes of first-time buyers in terms of finding a suitable property to buy and local affordability”.

Three in ten (29%) prospective first-time buyers indicated that their single biggest concern is ‘finding a suitable property to buy’, up from 24% a year ago. Research from Rightmove recently revealed that the ‘curse of negative equity’ has hit second-steppers – those who would also be ‘first-time sellers’ – hardest. Around one in five (18%) second-steppers believes they are currently in negative equity and therefore reluctant or unable to come to market. The shortage of new
properties to market from this group in turn restricts the supply of properties that often suit first-time buyers. Rightmove’s research shows that the typical first-time buyer is looking to spend around £150,000, yet the supply of new properties to market at or below this level in October was down 5% compared to last year.

Shipside adds: “That the travails of today’s second-steppers can negatively impact tomorrow’s first-time buyers is a great example of how interconnected the housing market is. The credit-crunch has hit those who bought for the first time around the peak of the market hardest, with more secondsteppers stating that they have fallen victim to the curse of negative equity than any other group of homeowners. The result is that many have become ‘mortgage prisoners’ who are unable to place their home on the market, leaving some areas with a comparative shortage of suitable first-time buyer homes. This also helps underpin prices in an area, further hurting first-time buyer affordability.”

More than half (57%) of prospective first-time buyers expect to move more than 3 miles from where they currently live, including 38% who are searching more than five miles away. Lack of suitable choice is a likely factor, but with 62% of prospective first-time buyers stating that they believe asking prices in their local area to be above what they consider to be ‘fair and reasonable’, it also seems many have to look further afield for value.

Shipside comments: “The combination of less suitable property choice and the necessity of having to hunt for the best value means that many of next year’s first-time buyers will have to cast their net wider to catch their first home.”

Around a fifth of first-time buyers (22%) are expecting to purchase with a deposit of less than 10%. While some lenders are offering products to first-time buyers at a loan-to-value of 90% or higher, the options are more limited at this level and the interest rates less competitive. However, it is perhaps not surprising that such a number of first-time buyers are looking to purchase despite a sub-10% deposit given that Rightmove’s research also reveals that of those with a deposit of 10% or more, 38% say that they have been actively saving for 5 years or longer.

Shipside observes: “Four out of five first-time buyers expect to have a deposit of 10% or more, showing a growing acceptance of the deposit rules that have become the new norm in their quest to get a roof of their own over their heads. Anything less than that will lengthen your odds of being able to jump onto the home ownership ladder, and it seems a bigger deposit is the spring board where most aspiring first-time buyers are headed in their attempt to make that first rung”.

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