The generational challenge of

rising house prices

Decades of rising house prices have stretched affordability

to breaking point for thousands of prospective first-time

buyers. The average house price stands at £228,000; eight

times the average wage in the UK1. In the last decade alone,

house prices have risen by 45%, supported by expansionary

monetary policy and a chronic lack of housebuilding. By

contrast, wages have risen half as quickly2.

As a result, home ownership has plummeted for younger

generations. Ten years ago, 55% of people aged 25-34 owned

their own homes. This has fallen to 38%. Also, the average age

of a first-time buyer is rising; standing at 33 years old today

compared with 31, ten years ago3. The number of first-time

buyers may have improved in recent months, but there’s an

awfully long way to go to reverse this trend.

It’s the upfront cost of purchase, including the size of the

deposit, that’s holding buyers back, rather than monthly

mortgage costs. UK Finance data4 shows that despite borrowers

requiring far larger mortgages, repayments only account

for 17% of a first-time buyer’s income, down from 22% a

decade ago.

Historically low interest rates have allowed mortgage lenders

to offer lucrative mortgage rates. Meanwhile, the average

first-time buyer deposit stands at an astonishing £44,6355.

It’s no wonder homeownership has been delayed for hundreds

of thousands of buyers as they save for longer.

For many, owning a home seems a pipe dream, especially

if not supported by the Bank of Mum and Dad, or if they’re

buying without a partner or spouse. It’s no surprise, therefore,

that single-adult households make up 51% of the private rented

sector, yet account for just one-fifth of households that own a

house with a mortgage6.


Could shared ownership be

the silver bullet?

The Government and the mortgage industry have sought

innovative solutions to ease the problem for first-time buyers,

through the removal of stamp duty and the introduction of

the Help to Buy scheme. Despite tackling the core problem of

deposit constrained buyers, shared ownership is less well known.

In a shared ownership scheme, a buyer purchases a share

of a property from a housing association and pays rent on

the remainder. The buyer then has the option to buy more

of the property over time. Because the purchaser only needs

a mortgage for part of a property, the required deposit is a

lot lower.

There are already around 200,000 shared ownership homes in

the UK, and given the Government’s commitment to supporting

affordable homes building, we can expect this figure to

increase. In 2015 the Government announced a target of

building 135,000 shared ownership homes, superseded by a

£9.1bn commitment for affordable homes. In the 2019 Spring

Statement, a further £3bn in funding support was guaranteed

for housing associations. Brokers should therefore be prepared

to see a higher number of shared ownership applications.



1 ONS House Price Index (January 2019); ONS Average Weekly Earnings (January 2019)

2 ONS House Price Index (January 2019); ONS Average Weekly Earnings (January 2019)

3 ONS English Housing Survey 2017-18

4 UK Finance Data 2018

5 ONS English Housing Survey 2017-18

6 ONS English Housing Survey 2017-18