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09 June 2014
More young homeowners are likely to be burdened with longer term debt and financial worries to get onto the housing ladder than previous generations
According to findings of the 2014 Homeowner Survey by HomeOwners Alliance and myhomemove, younger homeowners are resorting to desperate measures to realise the dream of buying their home. Seven in ten homeowners aged 25-34 have relied on finance options that include: longer term mortgages of over 25 years, the bank of Mum and Dad, low interest mortgages, small deposits, interest-only mortgages and government schemes such as Help to Buy.
Among young homeowners (aged 25-34) who have relied on affordability financing options to help them buy their home, half say they are worried about their housing debt. In particular, 23% say they worry about the size of their mortgage and being able to repay it one day, 20% say they worry about negative equity and 19% say they worry about their monthly mortgage payments over the long term.
While these financing options help many young people afford to buy their first home, they may also be storing up future problems and financial worries.
Key findings of the 2014 Homeowner Survey, conducted by YouGov, include:
- Younger homeowners are more likely to use affordability finance options to buy their home (including low mortgage rates, loans from friends and family, extended mortgage terms of over 25 years, low deposit to mortgage value and government/ shared ownership schemes like Help to Buy). 72% of young homeowners (aged 25-34) say they used one of these finance options versus 62% of UK homeowners overall
- Younger homeowners are more likely to rely on extended mortgage terms, loans from family and friends, low deposit to mortgage value and government/ shared ownership schemes to help them buy:
- 28% of young homeowners (aged 25-34) say they have an extended mortgage term of over 25 years (vs 17% of UK homeowners overall)
- One quarter (24%) of young homeowners (aged 25-34) say they borrow from family or friends (vs 11% of UK homeowners overall)
- 23% ofyoung homeowners (aged 25-34) say they have a low mortgage rate/ deal (comparable to the level indicated by UK homeowners overall)
- 12% of young homeowners (aged 25-34) say they have a low deposit to mortgage value (vs 8% of UK homeowners overall)
- 10% of young homeowners (aged 25-34) say they have used government/ shared ownership schemes like Help to Buy (vs 4% of UK overall)
- 49% of young homeowners who have used affordability finance options to help them buy worry about their housing debt vs 30% of all UK homeowners who have used affordable financing.
- Of young homeowners (aged 25-34) who have used affordable financing to buy their home, 23% say they worry about the size of their mortgage and being able to repay it one day, 20% say they worry about the size of their mortgage in relation to the value of their home and 19% say they worry about their monthly mortgage payments over the long term.
- Interest rate rises are a particular concern with more than one in three (34%) UK homeowners and one in two (49%) homeowners age 25-34 saying they fear a rise in interest rates will make it more difficult to afford payments on loans and debts
Other Related Findings of the 2014 Homeowner Survey conducted by You Gov include:
- The appetite to own your own home is on the rise (In 2014, 68% of non homeowners in the UK indicate they would like to own in the future; up from 65% in January 2013)
- However, ability for First-time buyers to get on the property ladder (87%), saving for a deposit (86%) and house prices ( 77%) are top housing concerns nationally
- House prices are of particular concern for those who aspire to own (Among potential first time buyers, 52% say house prices are a very serious problem compared with 39% of UK adults generally)
Paula Higgins, Chief Executive of the HomeOwners Alliance, the UK consumer group championing homeowners, says: “As house prices rise and homeownership levels drop, young people are left with no choice but to resort to desperate measures to realise their dream of owning their own home. This goes to show how the housing crisis is giving young people a raw deal. Schemes to help make homes more affordable in the short term do little to solve the fact that we need many more new homes, in the right places and at the right price.”
Doug Crawford, CEO of myhomemove, the UK’s leading conveyancing provider, says: “Our own data shows that over the past year, the average deposit size has decreased by 1.2% despite house prices rising by nearly 8% - just showing how much schemes like Help to Buy are having an impact, especially outside of the capital. For first time buyers, those likely to be aged 25 – 34, this is a double edged sword; yes it helps them onto the property ladder but there is a real danger that unless they have bought a home they can grow into, they will become trapped as market prices outpace them or a future downturn puts them into negative equity.”