The painful experience of securing a mortgage is deterring two in five aspiring first-time buyers (42%) from pursuing homeownership, new research from Perenna reveals.
Nearly two-thirds of first-time buyers (62%) have faced difficulties securing a large enough mortgage to buy, making the dream of homeownership feel unattainable for many. London is hit hardest with 65% of first-time buyers affected and where property prices are 34% higher than the average property price in the UK.[1]
Income-related difficulties are also prevalent, with 68% of first-time buyers experiencing challenges securing a mortgage due to their income level.
Mortgage income limits which restrict how much buyers can borrow – usually up to 4 or 4.5 times an individual’s income[2] – pose an increasing homeownership barrier at a time when housing affordability is so low. The average house price in England is eight times more expensive than the average individual income.[3]
The affordability crisis is forcing many first-time buyers to make major life milestone sacrifices to save up for a large enough deposit. Half (50%) are delaying major life events such as marriage, starting a family, or changing their job to fulfil their dream of homeownership.
All of these struggles are causing many to feel put off buying a home, as they witness the painful and disheartening experience others go through.
One solution to solving this housing affordability issue is longer-term fixed-rate mortgages, like the ones Labour’s Rachel Reeves is backing[4], which are gaining popularity; 20% of respondents are opting for these type of mortgages (those with a fixed term over 10 years). Nearly three-quarters (72%) agree that if a mortgage provided them a home, without the risk of repayments shooting up, it would give them confidence in stepping onto the homeownership ladder – indicating a strong demand for greater stability and predictability in the home-buying process.
Two in five (40%) believe that mortgage lenders need to better support first-time buyers by allowing greater borrowing power and nearly half agreed (48%) that if there was a mortgage that allowed them to borrow more to buy, they would find this attractive to consider.
Perenna is providing a solution by offering longer-term fixed-rate mortgages from 15 years, all the way up to 40 years, offering a stable and far more attainable path to home ownership. As of 28 February 2024, current rates for first-time buyers and new purchases start from 5.76% for a 90% LTV (over 30 years with a product fee), and 5.99% for a 95% LTV (over 30 years with a product fee).
Arjan Verbeek, CEO and co-founder of Perenna said, “It’s a travesty younger people are put off from one of the most rewarding experiences in life, becoming a homeowner. Seeing mortgage payments shoot up for millions of people because of how traditional mortgages work will of course put off many would be homebuyers. We need to change this trajectory urgently.
We believe everyone deserves a chance to own their home and enjoy living in it without worry. Longer-term fixed-rate mortgages are part of this solution, providing greater borrowing power, and stability through payments that don’t shoot up, a far cry from the way traditional high street mortgages work. Perenna’s goal is to make homeownership a reality for first-time buyers and make us a nation of happy homeowners.”
