According to research from Pegasus Insight, figures suggest there is a “pipeline of first-time buyers” forming among tenants, especially among young tenants between the ages of 21 and 34.
Approximately 43% of this segment have explored whether they could afford to get onto the property ladder and over a third have looked for a potential property.
Looking at Central London, 39% of renters have checked affordability, 20% have looked at possible homes and 21% have spoken to mortgage advisers.
Pegasus Insight said this was a “notable signal” for lenders and brokers that despite constrained affordability, there was a “substantial minority” of tenants looking to become prospective first-time buyers.
More than half of tenants said they planned to buy a property at some point, while 22% believe they will stay in the private rented sector (PRS) for the foreseeable future.
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Almost 68% of 18-34-year-old tenants hope to buy their own home, while 15% of tenants over 55 think they will become homeowners.
Mark Long, founder and director of Pegasus Insight, said: “Too often, tenants are seen as a captive audience for landlords rather than tomorrow’s first-time buyers. But the fact that nearly a third are actively researching mortgage affordability shows there is a sizeable group getting ready to transition into homeownership. With close to 20 million people living in the private rented sector, that equates to as many as six million potential new mortgage customers.
“For brokers and lenders, this is a clear signal: these are future borrowers who will need guidance, accessible products and support to bridge the gap between renting and buying. One of the most important steps the market can take is to evolve affordability assessments.”
He continued: “At present, many would-be buyers find themselves excluded, even if they have a proven track record of paying rent at levels equivalent to – or greater than – the mortgage they would be taking on. Innovative solutions that factor in rental payment histories are a good example of how to widen access.
“With the FCA having recently relaxed its guidance on affordability, some lenders may judge this to be the right time to broaden their approach. Recognising consistent rental records could help ensure responsible tenants are not unfairly locked out of homeownership. With carefully designed solutions, advisers and lenders have a real opportunity to connect with this emerging pool of first-time buyers.”
