First-time buyers losing confidence due to cost-of-living and interest rates

27 November 2023 , 14:00

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Just one in ten aspiring homeowners reckon they will be able to buy in the next 12 months (Image: SWNS)

High interest rates (51%), and the impact of the cost of living on disposable income (64%), are driving a loss of confidence – when it comes to homeownership goals, according to first-time buyers.

Over half of aspiring UK homeowners (56%) are keen to get onto the property ladder in order to stop renting, while 62% want to do so in order to feel more financially secure.

And 82% say that buying their first home remains a priority for them – with 17% having saved more towards a deposit over the last year than they anticipated.

However, the biannual survey, of 1,000 aspiring buyers, found that over the last 12 months, 58% have pushed back their home-buying goals, while 29% have compromised on their ideal location.

And just 35% now feel confident about becoming a homeowner – down from 42% in November 2022. Similarly, the number of those who believe they can reach their goals within the next 12 months has fallen from 35% 12 months ago – to just 10% now.

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However, the number of Brits who say getting onto the property ladder is a very important financial goal for them has doubled, from 24% a year ago, to half of those polled this year.

Four in ten have delayed their buying goals until the housing market calms down (SWNS)

The research was commissioned by Moneybox Homebuying, and found that, among those feeling optimistic, 23% have seen their household income increase in the last year, while 25% are hopeful that house prices are falling.

Brian Byrnes, head of personal finance at Moneybox, said: “First-time buyer hopefuls have endured a sustained period of economic and mortgage market uncertainty – yet despite this, the desire to own a home has increased significantly, and remains their most important financial goal.

“In fact, so far this year, we’ve seen a staggering 42% increase in the number of new customers opening a Lifetime ISA, to avail of the 25% government bonus on their deposit savings – a boost of up to £1000 of free money each tax year.

“There can be no doubt it has become increasingly difficult to get on the property ladder in recent years, and first-time buyers need more support.

“We also know that saving a suitable deposit remains one of the biggest hurdles many face on the journey to buying a home.

“That is why the Lifetime ISA is such a lifeline for so many – with more than 117,000 first homes purchased with the help of a LISA, far sooner than would have otherwise been possible.”

The study also found 39% of prospective first-time homeowners have chosen to bide their time until the housing market is calmer, before trying to buy.

For 56%, the desire to become a homeowner stems from wanting to have control over their home, rather than their landlord having the final say.

And over a quarter are taking more time to build up a deposit, putting away an average of £287 a month (Kmatta/Getty Images)

However, exactly two-thirds have adjusted their homebuying budget and goals within the last six months, and 27% have decided to save for a larger deposit – with those actively saving for their first home deposit putting aside £287, on average, each month, and hoping to buy in under four years.

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The research, carried out via OnePoll, found more people are now relying on their personal savings to fund their home purchase – 76%, compared to just 48% a year ago.

And the number looking for financial support from their family has dropped from 24% at the end of 2022, to 20% now.

Brian Byrnes, from Moneybox, added: “At a time when first-time buyers most need a helping hand, we believe far more could be benefiting from the fantastic Lifetime ISA government bonus than are currently doing so.

“However, the Lifetime ISA may not be suitable for everyone who is eligible for it, so it's important to do your research.

“While 90% of our Lifetime ISA customers who’ve bought their first home, paid less than £404k, the LISA property price cap of £450k may be a cause for concern for some living in the most expensive parts of the country.

“There is also a 25% government penalty fee on all unauthorized withdrawals, meaning savers may get back less than was paid in.

“Don’t be afraid to seek advice from home-buying experts to help dial down the noise, and thoroughly prepare for your home-buying journey, with greater confidence.”

Gemma Francis