Posted on 6 November 2018 by
The tirade of negative press on millennials buying homes – or rather, not buying homes never seems to end. The issue is absolutely saturating the media and it’s easy to see why; Resolution Foundation found that a third of millennials ‘face renting from cradle to grave’. That’s a rather intimidating statistic. It’s also not the only one. Combine this negative discourse with the ongoing storm that is Brexit (notably a political decision many millennials starkly opposed) and stagnating wages, and you’ve got a generation writing off the possibility of ever owning a home.
According to the 2018 Halifax First-Time Buyers Review:
Millennials are buying homes. But they’re having to wait longer because of tougher entry conditions. The deposit millennials need to save has accelerated at a faster rate than the housing price so taking that first step is more difficult than ever, particularly as their wages aren’t matching up. The Guardian reports that the ‘average salary required by a first-time buyer to purchase a home in the UK has risen by 18% in the last 3 years, above the rate of earnings growth’. The aging first-time buyer is clearly no mystery. Older, professionally established millennials are likely to earn a higher wage than those at the lower end of the age bracket. They also have more time to save money they can put towards their deposit, increasing their changes of purchasing a home.
It’s ridiculous to assume that the increase in the average age of the first-time buyer isn’t related to that annoying deposit issue, but it may not be the only reason.
Millennials have different priorities from previous generations. They’re are settling down later in life than their parents. Bridebook reported that the average age women married in 2017 was 30.8, compared to 22.6 in 1971. Similarly, men were marrying at 32.7 years old in 2017, compared to 24.6 in 1971. This is likely a culmination of factors, such as money restrictions, new societal expectations, career choices, personal preferences and more.
One of the biggest motivators for buying a home is the desire to settle down. If millennials are waiting longer to marry, it makes sense that they’re less inclined to commit to a permanent residence in their twenties.
Does this mean they’re more focused on their careers than building a home? Perhaps. Trust for London revealed that the capital ‘has a net migration inflow for ages 15 to 29, with an outflow for all older age groups’. Most of these millennials are likely relocating London for study or for career prospects, but it doesn’t seem their professional commitment is lining their pockets and furthering their chances at purchasing a home – it’s quite the opposite. They’re renters.
The millennial generation arguably feel more pressure than ever to choose between the professional opportunities available in big cities – where property prices are generally higher - and the stability offered by homeownership in more affordable areas. Any inclination they have to settle down must wait.
Despite the discouraging landscape, Halifax found there were 175,500 first-time buyers for the first half of 2018. This is 4000 more than the same period in 2017. It’s also the closest we’ve come to the 2006 boom of 190,900. Finally, some good news! Millennial homeownership isn’t a myth. Instead, it appears that more people are buying homes for the first time in recent years; they’re just having to wait longer to take that leap because of various economic and social factors.
A lot of lenders check your identity electronically. The easier this is for them, the better for you. Being on the electoral register often speeds up the process, as it counts as proof of address and can link your address history. It also affects your credit score which is a major component that lenders take into consideration.
When you apply for a mortgage, your lender will perform a credit check. Taking out a credit card is an easy way to start building up your credit score. You make small purchases on your credit card and then set up a direct debit to pay the full balance at the end of each month. It’s minimal hassle and can make a real difference to your credit as it shows you can handle a monthly financial commitment.
Zoopla found that the north east England, Yorkshire and the Humber and East Midlands were the most affordable areas, while London remains streaks ahead of the UK’s most expensive locations, the East of England and South East England.
It’s perfectly acceptable for your parents to give you the money for a deposit as a gift. Some lenders expect this from first-time buyers, particularly younger ones. It’s usually only ever an issue if you’re required to repay that deposit during the mortgage period, whether this is in bulk or by way of monthly payments – because if you need to pay it back, then it’s not really a gift.
Figuring out how to buy a home is hard enough, let alone trying to find the best mortgage deal by yourself. The whole point of using a mortgage broker is to make the process simpler, quicker and easier, so consider using one before you dive in uninformed. A broker can also get a mortgage pre-approved, which can help with negotiating a price on a property with the estate agent.
For more tips, see our Guide to Buying Your First Home.
We should continue to see an increase in older first-time buyers, especially those migrating north to cheaper areas. According to the Guardian, ‘rising taxes and tougher lending criteria are slowly tipping the balance in favour of homebuyers rather than property speculators’. Renting, especially in big cities, is becoming more and more unfeasible. Combine this with the growing number of career opportunities available outside of London – and millennials are left with more areas to choose from and the option to settle down, even if they don’t want to yet.
We shouldn’t be telling millennials that buying a home isn’t an option for them. Certainly, it’s harder to save a deposit; it’ll probably take longer than it did for your parents. But that doesn’t mean you’ll never get there.
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The blog postings on this site solely reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.