But the reality of soaring house prices, coupled with a higher interest rate environment, is putting this dream out of reach for many.
In 2022, first-time buyers were faced with house prices 16 times higher than those in 1982, while earnings had only increased seven times as much. At the heart of this affordability challenge is a severe shortage of supply. Fewer houses mean more competition, and those at the lower end of the income scale miss out.
The Prime Minister recently announced plans to build hundreds of thousands of new homes. This is good news, but clearly these homes will take time to be built and, in the meantime, buyers need additional support to get onto the housing ladder.
Small adjustments to help buyers
Ahead of the Spring Budget, UK Finance wrote to the chancellor to propose a number of ideas. The UK has had some fantastic schemes to help homebuyers, and we feel that, rather than reinventing the wheel, recent or existing schemes should be adapted and improved.
Firstly, the Lifetime ISA (LISA) scheme should be re-evaluated to make it more impactful and reflect the increasing cost of buying a home. We believe the annual savings cap should rise in line with inflation as a minimum, and the limit on the value of the home being purchased should rise in line with the annual House Price Index.
Likewise, the 25 per cent penalty for withdrawing funds, other than for home purchase, should be reduced to 20 per cent.
The affordability challenge is pulling households from two directions: the increased cost of homes; and a dwindling level of savings due to the rising cost of living. As saving for the costs associated with buying a home will be more difficult in this climate, we have proposed making the temporary first-time buyer stamp duty threshold of £425,000 permanent.
We have also asked for Help to Buy to be reinstated, with a keen eye on the differences in property values across the UK. The maximum property price allowed under the previous scheme was £300,000. With the average property price in the capital over £700,000, allowances for regional differences would ensure that buyers in London, Bristol, Birmingham, and Manchester are not disadvantaged.
Another important scheme that needs to be expanded is the First Homes scheme – a brilliant initiative to help key workers and those on lower incomes to buy their first home close to where they work. We are also fully supportive of the work being undertaken to refresh shared ownership, to ensure that it continues to grow in popularity and remains fit for purpose.
By reinvigorating current and previous schemes, while addressing the longer-term challenge of housing supply, we believe we can create a more inclusive mortgage market. Crucially, this should help ensure prospective homeowners are able to afford the homes they need.
