4 of the biggest challenges facing first-time buyers - and how to overcome them - Which? News (2024)

Building societies are calling for the government to make it easier for first-time buyers to get on the property ladder.

A new report by the Building Societies Association has shone a light on the challenges facing buyers when it comes to deposits and mortgage affordability.

If you're thinking of buying your first home this year, it might sound like it's all doom and gloom. But we're here to help. Read on to learn about the practical steps you can take to overcome the biggest struggles first-time buyers face.

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First-time buyers face worst conditions in 70 years

A new report by the Building Societies Association (BSA) says becoming a first-time buyer is 'possibly the most expensive it has been over at least the last 70 years'.

The findings come after a separate survey by Nationwide discovered that one in five prospective first-time buyers don't think they'll be able to buy until their forties. The average age is currently 33.

The BSA says that the number of homeowners with mortgages has fallen by more than two million since peaking in 2002, with affordability challenges meaning that in many cases, people require two above-average incomes and help from family members to buy their first home.

It has proposed a series of changes to the property market that it says will make it easier for people to get on the ladder, including regulatory and tax reforms.

The report has been backed by the BSA's five largest members - Nationwide, Coventry, Yorkshire, Skipton and Leeds - as well as the Intermediary Mortgage Lenders Association.

• Find out more:why the property market isn't working for anyone

1. Saving a big enough deposit

Nationwide's survey found that saving a big enough deposit remains a significant barrier to homeownership.

Three in 10 prospective buyers (31%) said saving was the biggest issue they faced, while one in 10 (10%) said it would take them at least six years to save enough money.

The challenges have been exacerbated by the rising cost of living. Half of respondents (52%) said they have less money free to put aside than before.

Three in 10 respondents (29%) said cost of living pressures had also affected the additional financial support they might have been able to get from family members.

What you can do:

• Open a lifetime Isa:if you're putting cash aside specifically to buy a home, it's worth opening a lifetime Isa. These savings accounts offer a 25% bonus from the government when you buy your first property. You'll need to be aged 18-39 to open an account, and buy a house for £250,000 or less (£450,000 or less in London) to get the bonus.
• See if your family can help:not everyone can gift or loan money to their children, but there are some other ways your parents might be able to help. For example, some lenders offer guarantor mortgages, which allow parents to use their savings or property as collateral for their child's mortgage. In some cases, this can allow you to buy a home with little or no deposit.
• Consider shared ownership:shared ownership schemes enable you to buy a stake in a property (typically from 25%) and pay rent on the rest. This can help you get a foothold on the property ladder with a small deposit. However, the combined monthly costs can be high, so make sure you do your sums.

Find out more:mortgage deposit calculator - how long will it take you to save?

2. Finding somewhere you can afford to buy

House prices might be stagnating at the moment, but they've risen significantly over the last decade, pricing many people out of homeownership.

Nationwide says 70% of would-be buyers are willing to move up to 50 miles from their rented home to be able to buy a property of their own.

The BSA is calling for the government to ensure that house prices don't rise faster than earnings over the long term. It says this can be done by prioritising improving the supply of homes and revising the planning system.

What you can do:

• Get savvy with portals and the Land Registry:the house prices you see on portals like Rightmove and Zoopla are asking prices - not sale prices. In a buyer's market (which it largely is right now), it can be possible to shave at least 5% off these, but this will vary from area to area. To find out recent sale prices in your area, you can use the Land Registry's price paid tool.
• Consider commuter towns:if you're looking to buy in an expensive city such as London, it's worth seeing how much you could save by moving to a commuter town instead. Our guide on buying a property in London includes information on property prices in popular commuter towns.
• Spot an up-and-coming area:see if you can get ahead of the game and pick out the next property hotspot. Our guide on finding the best place to live includes tips on spotting an up-and-coming town.

3. The cost of mortgage repayments

Even if you can save a big enough deposit, you might find that the projected mortgage repayments dent your hopes of homeownership.

This is because mortgage rates have risen considerably over the last 18 months. And while it's hoped that rates will begin to fall later this year, any significant drop appears unlikely.

The BSA says the government has heavily prioritised financial stability in recent years, with the strict regulatory environment resulting in fewer people being able to buy homes.

It says this should be reviewed, and that lenders should be given more freedom to offer a 'diverse range of mortgages'.

What you can do:

• Look into longer mortgage terms:where 25-year terms were once commonplace, a growing number of first-time buyers are now borrowing for 35 years or more. Some lenders set maximum age limits on their mortgages of 70 or 75, making it easier to borrow for longer. One word of caution though: while a longer term will make your repayments cheaper, you'll ultimately pay more in interest.
• Check your loan-to-value:mortgage rates are generally set in 5% brackets, so you'll get one rate if you're borrowing 90% of the property price (90% LTV), and a different one for a 95% loan. Consider whether you might be able to save for a little longer and get into the next bracket. Doing so could help you get a much cheaper deal.
• Speak to a broker:there are thousands of mortgages out there, making it complex to find the right one for your circ*mstances. Consider taking advice from a whole-of-market mortgage broker on your options.

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4. Being able to borrow enough for a mortgage

Both the BSA and Nationwide are calling for reforms to the borrowing caps imposed on lenders assessing your mortgage affordability.

Currently, lenders are only allowed to grant 15% of loans at four-and-a-half-times the applicant's household income or higher.

This means that people with lower incomes are being locked out of being able to borrow enough to buy a home.

What you can do:

• Look into specific first-time buyer deals:some lenders offer targeted deals for first-time buyers to help them boost their borrowing. For example, Nationwide's 'Helping Hand' mortgage allows you to borrow up to five-and-a-half times your income. Speak to a broker about whether a specialist deal might be right for you.
• Don't just stick to your bank:mortgage rates are high but there's a lot of choice out there. Banks all set their own criteria, so it's really important to shop around to find the right deal. Don't fall into the trap some homebuyers do of simply applying for a mortgage with your current bank.

Advice for first-time buyers

Wherever you are on your home-buying journey, you can find lots of great advice and tips on our website.

Our guides take you through the key steps of buying a house, including saving a deposit, getting a mortgage, getting a survey on your new home, and moving day itself.

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