Financial instability continues to block FTBs from key life milestones

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First-time buyers are struggling to save for a house despite savings made during lockdown, according to new market research from Tembo.

 

The research found that the mean amount first-time buyers said that they saved during the pandemic was £6,183.77, which equates to roughly a quarter of post-tax annual earnings on the average UK full-time income of £31,3611 despite the pandemic having continued for almost two years. More than one in 10 (14%) of first-time buyers said they haven’t been able to save at all, and this was as high as 24% of those earning less than £15,000 per year.

When it comes to impacts on their ability to save for a house, 50% of first-time buyers said rent is their top outgoing cost, followed closely by utility bills (35%) and groceries (26%), suggesting that first-time buyers are struggling to get ahead on saving while they pay for rented housing instead.

While the pandemic savings are not insignificant, they reflect a long period of time required for first-time buyers to achieve their required house deposit. Tembo’s research also found that first-time buyers expect to pay £270,620.59 for their first home, almost nine times the average UK salary.

The research comes as Tembo launches its new whitepaper: The First-Time Buyer Report: A Generation in Crisis which explores how the cost of homeownership and generational wealth gaps are influencing the lives of first-time buyers. The whitepaper is built on insights from two surveys – one of 1,019 first time buyers under 45-years-old, and one of 1,019 homeowners over 45-years-old. All survey respondents were based in the UK.

Younger first-time buyers in particular face further savings challenges, with changes to student loan repayments set to create further difficulties in saving. One in five (20%) of those aged 18 to 24-years-old said that their student loan is impacting their ability to save money.

The age group did however save more than their older counterparts, saving a mean amount of £6,503.78 compared to £6,257.32 for 25 to 34-year-olds and £5,843.86 for 35 to 44-year-olds. However, the youngest first-time buyers were the least likely among the age groups to cite rent as an impact on saving (38%), suggesting many 18 to 24-year-olds live with their parents still or have family paying rent for them.

Housing uncertainty means first time buyers are delaying life events

The impacts on savings are having a wider impact on first-time buyers’ lives too. Younger first-time buyers aged 18 to 24-years-old said they expect to delay having children because they want to own a home first (31%), and 29% also said they will delay other important life events and financial decisions because they want to own property first.

Overall, nearly a third (28%) of first-time buyers will delay or have delayed important life events and financial decisions because they want to own property first. A further fifth (22%) said they will delay or have delayed having children because they want to own a home first too.

Gender pay gaps are still causing problems

While the impacts on first-time buyers’ ability to save are broadly the same across genders, the findings reflect earning disparities between men and women, with these costs impacting women in higher numbers than men. Rent is the top cost for 56% of women compared to 42% of men, utilities for 39% of women versus 30% of men, and groceries for 31% of women compared to 21% of men. Women also saved 35% less than men during the pandemic, with male first-time buyers saving a mean amount of £7,679.87, while women saved £5,038.41, on average.

Richard Dana, CEO and founder of Tembo Money, said: “While homeownership isn’t the only factor influencing people’s family planning, it’s no secret that younger people have to consider not only whether having children is financially feasible, but also how parenthood would work while renting or living back at the family home.

“These particular concerns are unique to younger generations, who have found themselves locked out of an increasingly exclusive property market. Homeownership should be within reach of all working adults, and yet our report shows clearly that housing is a missing piece of the puzzle in allowing young people to pursue life’s major milestones.

“While the Bank of Mum and Dad is still a huge contributor to homeownership, lending around £6 billion each year, most families simply will not have the tens of thousands of pounds needed to help their child, which is why Tembo arranges and advises on a range of innovative family and later life mortgages which help first-time buyers get on the ladder faster and for less. These alternative means of financial help may allow younger first-time buyers to pursue their life goals sooner thanks to increased financial security.”

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