Taking the First Step: Overcoming Challenges in Homeownership

Nationwide Building Society recently unveiled findings from their survey focusing on the experiences of first-time homebuyers. With over 1,000 respondents intending to purchase their first home within the next five years, the survey provided valuable insights into the obstacles faced during this journey.

What do the numbers tell us?

The results highlighted some concerning yet expected trends:

• 31% of respondents identified saving for the deposit as their primary hurdle.

• For 44% of respondents, mortgage affordability posed the biggest challenge.

• A significant 60% are postponing their plans by up to three years.

• Nearly half attributed this delay to the ongoing cost-of-living crisis.

• The average deposit saved amounted to £9,533, falling short of the £22,400 needed based on the Nationwide House Price Index.

• Concerningly, 8 out of 10 expressed worries about affording mortgage payments.

• 6 out of 10 would contemplate relocating for more manageable mortgage terms.

• Alarmingly, 20% expected to reach their forties before achieving homeownership.

These statistics underscore the many challenges faced by aspiring homeowners, from saving for the initial deposit to navigating mortgage affordability, where and which house to buy, and managing future bills and repayments.

Preparation is Key

To embark on the journey to homeownership, there are some things that should be No1 priority:

1. Saving for the deposit: Understanding the average house prices in your desired area and ensuring your income (or joint income with partners) aligns with affordability criteria are crucial. Additionally, budgeting for associated fees like legal expenses and surveys is essential.

2. Maintaining financial stability: Avoiding missed repayments is paramount to safeguarding your credit file and bolstering your mortgage application. Missed payments can affect your likelihood of being approved, whether that’s a missed payment on Buy Now Pay Later (BNPL), a loan, credit card or payday loan. Awareness of how different financial commitments can impact your eligibility is vital.

3. Understanding affordability: Beyond estimating the typical minimum 10% deposit, evaluating your overall ongoing affordability through a detailed financial review is necessary. A lender assesses your affordability through either Open Banking (platform that directly accesses your transactions) or manual bank statements. Factors such as income, existing debts, and expenditures are scrutinised to gauge your repayment abilities.

Ideally you want to show lenders you have as much money left after deductions as possible, including a buffer to account for rates increasing. especially if rates increased. Existing rent payments are usually considered as funds which would be used to pay your mortgage. Before applying for a mortgage, it’s a good time to reassess your budget and trim expenses if you tend to overspend. This ensures a more accurate reflection of your affordability.

Navigating the Application Process

Once you’ve secured your deposit and you’re looking to start house hunting, you’ll usually follow the process of:

• Obtaining an Agreement in Principle (AIP) to give estate agents an idea of your affordability. Some agents will allow you to view properties without this, others might not.

• Upon finding your ideal home or apartment, negotiate an offer, proceed with mortgage affordability and credit checks through your lender/broker, solicitor consultations and a range of surveys.

• Should you and the seller be happy with the results of the process, you can look forward to the glory of receiving the keys to your new house!

To read more in depth about each of these steps visit our first-time buyer page within our financial wellbeing resources.

In essence, while the journey to homeownership may seem overwhelming, thorough preparation, financial wisdom, and a clear understanding of the process you can pave the way for a successful transition onto the property ladder.

Written by,

Alexandra Ly

Marketing Communications Manager