The average age of the first-time buyer is relentlessly on the rise, racing from 28 in the 1990s to 35 today, according to a survey by Post Office Mortgages in September 2012.
Hardly surprising, given the changes in availability of mortgages and the need to provide a larger deposit that are currently huge barriers to many aspiring home owners.
In truth, there are many factors that contribute to the largely stagnant property market that has become the norm since the credit crunch first bit some five years ago.
A quick look at house prices vs average salaries paints a telling picture.
In 2001 the average cost of a house was just under £122,000 with the average salary £16,500.
Today the average house price is £236,500 an increase of 94 per cent on 2001, and the average salary is £21,300, an increase of increase of just 29 per cent.
Add to that tough scenario the fact that the average 75 per cent LTV mortgage requires a deposit of £59,000, almost three years worth of an average salary and it’s clear to see why house purchase remains a remote dream for many.
Meanwhile the cost of living is also a real issue as it’s now five times higher than the average wage increase, according to Office for National Statistics Consumer Price Indices, April 2012. This year, the average family will need to earn an extra £1,000 to maintain the standard of living they enjoyed in 2011.
So, what can be done to help first-time buyers and to get the property market moving again? Well, we believe both lenders and the Government can make a significant impact here.
Affordability has to become the way lenders assess mortgage applicants.
We are now in an age when many would-be home buyers could afford monthly mortgage payments but don’t have any savings, so we all have to work harder to help these people, whether they have a deposit of 5 per cent, 10 per cent or no deposit at all.
At Teachers, we work on assessing applicants individually. A computerised approach is simply not practical with so many factors to consider when underwriting a mortgage application.
We are certainly helped by having a largely niche customer base. We understand teachers and know how their salary scales and career progression works, so we are able to offer a degree of flexibility.
There has been a significant number of initiatives launched to help address this issue from government and develop backed schemes, such as FirstBuy, to local authority indemnity backed schemes such as Local Authority Mortgage Scheme which as of November this year thirty-three councils had helped to generate nearly £100m in mortgage lending. We have been happy to support both of these schemes.
If FirstBuy and LAMS were just the beginning of a raft of initiatives to support first-time buyers, we may be able to stop this hard-pressed group pushing ever further into middle age.