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
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
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