Saving enough money for a deposit continues to be one of the main barriers to home ownership for first-time buyers, new research has found.
However, according to M&S Bank, young, aspiring homeowners are increasingly willing to consider buying their first home as a group in order to make the purchase affordable.
It found that 20% of people aged 18-35 do not believe they will be ever be in a position to own their own home, with saving for a deposit mentioned as the main hurdle. Around 59% of them said they had less that £1,000 saved up. Taking out a mortgage with up to three other people was seen as the only option to realise their property dreams.
The M&S Bank research found that the most popular companion choice for 18-25s, after living with a partner (58%), is with friends (25%). This was significantly higher than siblings (1%) and colleagues (1%).
As many as 95% of 18-25 year olds stated there were benefits to living with others, which included having company at home (62%), sharing the financial responsibility of a home (58%), and having someone to cheer you up when you’re feeling down (57%).
"Living with and buying a house with friends or family members alleviates the financial pressure of trying to afford home ownership alone – which is unattainable for many,” commented Paul Stokes, Head of Products, M&S Bank. “The option of becoming a mortgage-mate is particularly appealing to those already in a housemate arrangement, and our research shows that the concept has become increasingly popular with millennials."
Aldermore Bank has also found evidence that people are still finding it difficult to take the first step on the property ladder. According to its latest First Time Buyer Index, of those currently looking to buy their first home, almost nine in ten (89%) think it is difficult to get on the property ladder – slightly down from August 2017 (93%).
Raising a deposit is still the number one obstacle for 40% of prospective first time buyers, up from 34% in August last year. The number currently living with friends or family in order to save for a deposit has increased, from 23% in August 2017 to 27% in 2018, whilst a further third (33%) would consider it if it meant they could get on the property ladder quicker.
Concern about mortgage affordability has dropped since last year (from 12% to 5%), but for 10% of prospective first time buyers, actually securing a mortgage is the biggest concern – this remains on a par with last August (9%). In reality, 25% of first time buyers were refused a mortgage when they first applied through their main bank, with this most prevalent in London where nearly half experienced this (45%).
Aldermore’s findings weren’t all negative though. Of those who managed to achieve their home ownership dream, 79% said it has made them more financially stable, which allows them to better plan for the future (83%). For 81%, not having to waste money on rent is seen as a massive bonus. Additionally, most first time home owners feel confident they will be able to move up the ladder when the time comes (81%).
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