We live in changing times, whether it be the housing market per se or the demographics behind it, and as such it pays to be able to meet the needs of clients with increasingly complicated and diverse needs.
On average, 40% of British adults are now unmarried, and it does not take a genius to work out that this means that more and more households are one-person (or one-parent). In fact, almost a third of all households are ‘single occupied’, which is around three times more than 40 years ago.
The average age of the first-time buyer is increasing as well, and they are currently estimated to be in their early thirties before they buy. However, it is interesting to note that first-time buyers are not waiting for their perfect partner, they are simply going solo. Statistics show that more and more single people are choosing to buy property alone rather than wait for marriage or a partner to come along. For example, since 1983 the proportion of single women buying homes has increased from 8% to 17%.
But it is not just ‘first timers’ who are going it alone. According to the Office of National Statistics, around 41% of first marriages end in divorce and the age of those who take the plunge for the second time is now around the mid-forties ‘ adding even more fuel to the proverbial ‘singleton’ fire.
An increasing demand
The knock on effect of this shift in the country’s demographic make-up is that demand for flats and smaller properties have shot up and, in turn, house price inflation has rocketed. However, rising prices in general have meant single buyers have to wait longer to get on the housing ladder. If we just go back to 1973, an average sized house outside of London could be bought for under £10,000, and around £13,000 in London. In the space of just 30 years, even allowing for the effect of inflation, you could just about get a small new car for that money now but for a home you are now looking at almost £200,000 in London and around £80,000 elsewhere.
Latest figures show mortgage lending hit £19.5bn in August, the third highest figure on record, according to the Council of Mortgage Lender’s latest figures. And the Halifax House Price Index shows that with October’s record breaking increase of 4.7%, annual house price inflation is running at 30.4%.
The Land Registry has found that in the three months to the end of September, house prices rose by 18%. Rising fastest is East Anglia at around 24% annually whereas London is slowing down ‘ a mere 15%. What this means is while there are shifts in regionality of the housing market, there is no real cooling down of this upward trend.
Therefore finding financial solutions for the ‘free and single’ generation is a challenge for intermediaries, and lender alike, but there are a myriad of options available, although the watchword would be to tread carefully ‘ short-term wins could prove expensive in the longer term. There are some mortgage lenders who are willing to extend income multiples way beyond the usual limitations which is more than tempting for many first-time buyers. But is this stretching of affordability sensible in the longer term? Another worry is putting together a deposit. Many will opt to borrow this, but whether or not this is sensible needs to be carefully examined as an additional loan or credit payment will eat into any monthly budget for a significant period afterwards.
To overcome these affordability issues, many friends are now buying together and this could be the perfect solution for the single person. This type of arrangement means that borrowers would each take a share of the property, mortgage and associated costs. However, caution should again be advised and a tight legal contract is needed for anyone contemplating this option.
The financial dilemma faced by many single people is that their situation is more likely to change in the short term when compared to a ‘smug-married’. Therefore, they do not want to be looking for a deal that is restrictive in any way or does not provide the options to them should they meet their ideal partner and decide to pop the question and settle down. Flexibility could be the perfect match as Miss single client + Mr flexible solution = a long and happy relationship, supporting the lifestyle changes that could once have been considered grounds for a financial divorce.
A flexible mortgage enables the borrower to overpay and enjoy tax efficient savings in their mortgage, and some lenders will allow the borrowing back of these payments at anytime, for any occasion ‘ guaranteed. What this means to a young single borrower is that they can save for future events such as a wedding or larger property, while lone parents can save towards the extortionate cost of childcare (estimated £6,000 a year for two children ‘ one pre-school and one older). Self-employed or contractors can support their mortgage on one income by overpaying when they have work and using this money to cover the monthly repayments when they do not. If the only certainty in life is change, then you can be sure that the make-up of the house buying public is not set to settle down in the near future.
Single 20 or 30 somethings now account for over 40% of first-time buyers, and if you add in the large number of single second-time buyers re-entering the market after splitting from partners you have a force to be reckoned with. No one in the mortgage world can afford to ignore these borrowers or risk being left on the shelf.
Claire Kennedy is marketing communications and public relations manager at Britannic Money
A growing number of people are choosing to buy alone, rather than wait until they ˜settle-down’.
Getting started can be difficult as high income multiples and loans to raise deposits can be risky.
With more volatile financial situation than a couple, the mortgage needs to be flexible to cope with changing needs.