Written By Em

Although recent figures show that the number of first time buyers has reached its highest level in a decade, there is still a lot to be done to help those who are struggling to get onto the property ladder.

NAEA Propertymark (the National Association of Estate Agents) has outlined its suggestions to help first time buyers purchase their first homes:

1. Introduce longer term fixed rate mortgages

Although more lenders have introduced 95% loan-to-value (LTV) mortgages, the fixed rate periods are low and interest rates are high. First time buyers need to save an average of £33,000 for a deposit for their first homes, so anything that brings the overall cost down is needed. First time buyers need access to mortgage products that give them affordable monthly repayments, and a longer fixed rate term, but don’t require a huge sum of money upfront.

2. Offer help to the other end of the market 

There’s so much focus on first time buyers that it’s easy to forget the struggles being faced by buyers and sellers alike further up the property ladder. Property that would be suitable for those looking to buy their first homes is currently occupied by first time sellers who can’t afford to move up the ladder, so they’re staying put. Offering incentives to those at all ends of the market will mean more suitable first time buyer properties will be freed up.

3. Build more affordable housing

The imbalance of supply and demand in the UK has caused house prices to spiral out of control, pushing homeownership out of reach for many. More affordable housing is the key to helping first time buyers enter the market, according to three in five (58%) estate agents, and, until the Government fulfils its housebuilding promises, the situation will not improve.

4. Lower the costs of moving 

Although the Government’s Stamp Duty relief for first time buyers has lowered the associated costs of buying a home, there are many other additional costs that put a financial strain on first time buyers. NAEA Propertymark agents think that introducing discounted surveyor costs (11%) and a form of grant to subsidise solicitor fees (11%) would make things easier for the group. Or, by giving first time buyers the option to borrow additional funds from their mortgage lender to cover these costs, could provide them with that extra helping hand.

5. Less stringent mortgage criteria

In order to help first time buyers, lenders need to approach their criteria differently. Those who are self-employed or work as contractors are currently snubbed because they might not fit their lending criteria. They are also required to produce three years of accounts to prove that they earned what they claimed, which makes the process stressful and feel impossible. Furthermore, for aspiring first time buyers who are currently renting, proving you can successfully pay your rent is not sufficient to make you eligible for mortgage repayments. In the future, the organisation hopes that lenders will be able to take more sources into account when reviewing mortgage applications.

Mark Hayward, the Chief Executive of NAEA Propertymark, comments: “The Government’s announcement to abolish Stamp Duty for first time buyers has helped buyers feel like the process is more affordable. First time buyers are struggling, particularly when it comes to saving for a deposit, and this needs to be addressed.

“Positively, however, first time buyers are being practical. Since the Stamp Duty reforms, we have seen evidence that, outside of London in particular, they are delaying their search until they have more money saved, in order to purchase a bigger property. This means they’ll be able to stay in the property for longer, making the most of the Stamp Duty saving and helping their money go even further.”

The 20^th century growth story that has seen each generation enjoy higher incomes than the one before them has ground to a halt in nearly all advanced economies in the 21^st century, according to a major new report from the Resolution Foundation.

However, the research shows that the UK stands out for having experienced a boom and bust cycle where strong income and housing gains for post-war generations have failed to materialise for millennials.

Cross Countries, the 15^th report for the Foundation’s ongoing Intergenerational Commission, looks at household living standard changes for different generations across eight high-income countries. It found that the global financial crisis has had a profound effect in halting generational income progress. On average, across the countries featured in the report, millennials in their early 30s have household incomes 4% lower than members of generation X at the same age. In comparison, the incomes of generation X in their early 30s were 30% higher than the baby boomer generation before them.

However, while this overall trend of stalled progress is common throughout advanced countries, the report also highlights a number of country-specific challenges. These include:

Generational boom and bust on living standards

The UK stands out, along with Spain, as having previously enjoyed a long boom in generation-on-generation progress in household incomes that has since gone bust for millennials. When in their early 30s, generation X (born between 1966-80) were 54% better off than the baby boomers (1946-65) were at the same age. This pace of growth has not materialised for millennials (1980-2000); the incomes of those in this generation who have already reached their early 30s are just 6% higher than generation X’s at the same age.

Strong Income and Housing Gains for Previous Generations have Failed to Materialise for Millennials

The UK also stands out for combining a sharp slowdown in income progress with a major generational reversal on housing. Homeownership rates, compared at ages 45-49, surged by 29% between the greatest generation (born between 1911-25) and the baby boomers. This generation-on-generation progress has been all but wiped out for millennials, whose homeownership rate in their late 20s (33%) is half that for the baby boomers at the same age (60%).

Britain’s generational pay divide

UK millennials have paid for the financial crisis through their pay packets, rather than with their jobs, the report shows. The scale of the pay squeeze for those aged under 30 – a 13% fall in real terms – is surpassed only by Greece, where earnings have dropped by 25%. The UK pay squeeze for the under 30s was twice as big as the squeeze faced by those in their 50s – a bigger age divide than in any other country.

Mediterranean jobs crisis

Southern Europe has experienced a millennial jobs crisis, with the youth (15-30-years-old) unemployment rate more than doubling in Italy, Spain and Greece between the early 2000s and the years following the financial crisis, remaining above 25% today. In contrast, youth unemployment in the UK (9%) is almost as low today as it was during the 2000s, though there has been a rise in atypical working, such as zero-hour contracts and self-employment.

The enduring absence of generational progress

The USA and Germany – two of the highest income countries covered by the report – have seen minimal generation-on-generation gains in recent decades. The report finds that typical incomes in the USA for those in their late 40s are no higher for those born in the late 1960s than they were for those born in the 1920s – a trend long preceding the financial crisis and being driven in part by sustained increases in inequality during this period.

A Scandi-paradise for millennials? 

In Norway and Denmark, cohort-on-cohort earnings progress has continued unabated throughout the crisis years. While Norway avoided a deep recession, Denmark has achieved this progress, despite experiencing a similar sized fall in GDP per capita as the UK during the crisis.

The Resolution Foundation concludes that there are plenty of lessons that countries can learn from each other about tackling the millennial living standards crisis. From building enough homes and better regulation of the housing market, to flexible labour markets, active labour market policies and what unions can offer young people, learning from other economies can help with getting the story of generational progress on living standards back on track.

Daniel Tomlinson, the Policy Analyst at the Foundation, says: “It’s no secret that the financial crisis hit the vast majority of advanced economies hard, holding back millennial income progress in counties around the world. But only Spain echoes the UK experience – a boom and bust income cycle, where significant generation-on-generation gains for older generations have come to a stop for younger people. The UK also stands out for combining this lack of income progress with major declines in homeownership for today’s millennials.

“There have been big differences in how advanced economies have developed since the crash, and there are lessons for the UK to take from the winners and losers. Southern Europe’s jobs crisis has hit millennials hard. By contrast, Norway and Denmark – despite the latter taking a harder hit to its GDP post-crisis than the UK – haven’t experienced any damage to generational earnings progress.”

He continues: “From housebuilding to how we regulate our labour markets, there are a wide range of lessons for countries to learn and pitfalls to avoid from considering the experience of other nations. Britain may have avoided the shocking levels of youth unemployment seen in southern Europe, but it’s still a long way off providing the progress for young families that they and their parents had come to expect.”