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Owning a home could be an unrealistic dream for young Brits, study says

Buying a home is out of reach of most young people in Britain. Photo: Tom Rumble/Unsplash

The homeownership dream is at risk of dying for all but the wealthiest buyers, unless urgent action is taken by government and industry, new research suggests.

In the biggest-ever study of potential first-time buyers, by Santander Mortgages, nine in 10 (91%) young Brits – aged 18 to 34 – said they aspire to own a home, with half (51%) putting it as their biggest goal.

But 70% think this dream is already “over” for their generation – and they could be right, as house price inflation continues to outstrip wage inflation. While house prices have risen 47% over the past decade, wages have increased just 18%.

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Based on living standards, poverty and inequality data from the Institute for Fiscal Studies, Santander estimates that by 2026, less than a quarter of young Brits will be able to get on the property ladder.

The study found the sharpest fall in first-time buyers has been among those on middle-incomes of between £20,000 and £30,000. Homeownership rates among this group have fallen from 65% in 1996 to just 27% at present.

Of those who have been able to buy in 2019, 64% have a household income of over £40,000.

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Miguel Sard, managing director of Santander Mortgages, said: “It’s clear that while the aspiration to own a home is just as strong as in previous generations, it’s a dream that is looking increasingly out of reach.

“Without change, homeownership in the UK is at risk of becoming the preserve of only the wealthiest young buyers over the next decade.”

The study found the biggest barrier to first-time buyers getting on the property ladder is raising a deposit (30%), followed by getting a mortgage based on their income (15%).

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Buyers’ ability to get onto the property ladder is increasingly dictated by “the bank of mum and dad” and family inheritances, the study found.

While industry data shows 39% of first-time buyers had help from living family, and 10% from an inheritance, Santander’s found 40% of potential first-time buyers are now relying on an inheritance to boost their deposit.

But the costs of “later life”, such as care, could lead to future financial challenges for those “gifting” wealth, as well as those replying on inheritance to buy their first house.

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As a result, the average age of a first-time buyer has increased from 25 to 33 in the last two decades, and 40% have already started a family. This has made the three-bedroom house the most sought-after property.

The report also called for industry and the government to rethink the mortgage market, suggesting more flexible lending affordability criteria, and lowing stamp duty to incentivise those considering downsizing.