The boss of Britain’s largest housebuilder has said it is the most challenging time to be a first-time buyer since the financial crisis, as the dream of home ownership moves increasingly out of reach for many young people.
A combination of rising interest rates, higher levels of student debt and the squeeze on wages is making it “challenging, very, very difficult” for young people to get on the housing ladder, according to David Thomas, the departing chief executive of Barratt Redrow.
“Certainly, it’s going to be close to where we were post the great financial crisis,” Thomas said in an interview with the BBC. “That was probably more to do with lending coming out of 2008-2009, but I think it’s very, very comparable for first-time buyers, particularly when you look at areas like London and the south-east.”
Thomas said higher levels of student loan repayments were making it harder for younger people to get a mortgage.
“Once people are earning a certain level of salary they have a requirement to repay student debt, and therefore their available earnings as assessed by the bank for mortgage purposes will be lower, so inevitably the pool of people that can afford [it] is reduced by that underlying debt position,” he said.
As a result, he said the average age of a first-time buyer was increasing, which was among the factors leading “towards generational inequalities”.
Thomas is calling on the government to put in place a package focused on first-time buyers, adding that Barratt Redrow and other housebuilders have said they would be happy to contribute to such a package.
“There are very big implications for the country if people are not getting on to the housing ladder and are going to rent on a permanent basis. Home ownership, in terms of the building of the homes, in terms of people owning their own homes, has big benefits for the country,” he said.
Thomas’s comments came as separate figures from the property website Zoopla showed there are 6% fewer first-time buyers in the market than a year ago.
However, those that remain are not compromising on what they want to buy and are targeting homes worth £10,000 more than a year ago.
People trying to get on the housing ladder are looking at homes with an average price of £254,750, which is 4.3% higher than last year. This represents almost three times the rate of wider UK house price growth of 1.5%, which resulted in the price of the average home in the UK rising to £271,900.
In London, the average house price for a first-time buyer has moved above £500,000 for the first time, to £502,250, marking an increase of £15,000 from 12 months earlier, at a time when overall average house prices have not risen.
Outside the capital, more than half (53%) of first-time buyer inquiries are for three-bed houses.
The rise in the price of properties targeted by first-time buyers can be attributed to changes in mortgage affordability testing, Zoopla found, which has made more homes accessible to those wanting to get on the property ladder.
