A fifth (16.3 per cent) of adults under 50 who don’t own a home fear they may never be able to save a mortgage deposit, according to research by Latimer, the development arm of Clarion Housing Group.
Those aged between 35 and 44 were even more pessimistic, according to the survey, with almost a quarter (23.4 per cent) believing they would never be able to afford a deposit.
The findings have been revealed by a survey commissioned by Latimer, which sought to understand living situations, attitudes towards homeownership and awareness of shared ownership among adults under 50 in the UK. Participants were chosen based a range of demographic factors, which indicated they should be more likely than the average person to either buy or sell a home in the next 12 months.
Despite this, only 38 per cent of respondents said they were planning to buy a home in the next year, with more than a third of these people (36 per cent) already homeowners.
Only 10 per cent of non-homeowners surveyed thought they would be able to afford a mortgage deposit in the next 12 months.
According to the latest statistics from the Department for Housing, Levelling Up and Communities published in December 2022, 56 per cent of homeowners in the UK are aged 55 or over.
The findings demonstrate the extent to which people under 50 in the UK currently find themselves locked out of the homeownership, with many worrying they might never be able to afford a deposit.
With interest rates stuck at 5.25 per cent and data from the Office for National Statistics suggesting the cost of a new mortgage rose 61 per cent in the year to December 2022,[ii] there are wider concerns about the affordability monthly mortgage repayments too.
However, products such as shared ownership can make buying a home a much more affordable and realistic, according to financial expert, Peter Komolafe.
He said: “Millions of aspiring homeowners in the UK are finding it increasingly challenging to save a deposit for their first home. Recent interest rate hikes by the Bank of England, aimed at curbing inflation, have further dashed their hopes of achieving homeownership. Despite a decrease in property prices, the current mortgage rates available for first-time buyers with low deposits make affordability a daunting prospect, and in some instances, an unattainable one.
“In the absence of a clear replacement for the popular Help to Buy Scheme, which aided first-time buyers, shared ownership should now be seriously considered by those with aspirations of owning a home. The opportunity to get your foot on the property ladder and gradually increase your ownership share as your circumstances evolve offers both flexibility and optimism to individuals who may feel disheartened and marginalized.”
Shared ownership works by allowing people to take out a mortgage on a share of a property rather than the whole property, with the developer retaining ownership of the remaining share. This can vastly reduce the deposit required, in some cases to below £5,000, and can also bring down monthly repayments as homeowners take out a smaller mortgage.
With Latimer, homeowners are then able to increase their share of ownership over time up to 100 per cent if they wish, a process known as staircasing, and can sell their home at any point.
As the development arm of Clarion Housing Group, the UK’s largest housing association, Latimer is committed to offering high volumes of affordable homes at its developments. This includes at its flagship Cocoa Works scheme – which has regenerated the famous Rowntree’s Factory in York – where 30 per cent of homes are available on an affordable basis through shared ownership.
Richard Cook, group development director at Latimer, said: “There’s no question that the current economic landscape is challenging and has compounded the difficulties already posed by the UK’s long-standing housing crisis. For far too many people, homeownership is a distant dream.
“We believe it’s important to address this and that shared ownership has a major role to play in doing so. That’s why we use it to offer affordable homes at many of our schemes across the country.”
The research also found that over a third of those surveyed (34.6 per cent) are renting, with this rising to 40 per cent in London. This is despite the average rent in the UK sitting at £1,199 and topping £2,000 in the capital[iii].
Andrew Greenwood, deputy chief executive at Leeds Building Society, added: “We passionately believe that every generation deserves a place to call home and our purpose at Leeds Building Society is to put homeownership within reach of more people generation after generation.
“The cost of housing is at its most expensive point since around the time we were founded 150 years ago and the average deposit for a first-time buyer as a share of wages has more than quadrupled.
“That’s why we welcome the spotlight Latimer is putting on shared ownership. The ability it provides to secure a home with a much smaller deposit is particularly helpful for people looking to buy on their own. It can also help people buy at an earlier age and potentially grow their equity sooner by benefitting from any rise in the value of their home.”
