Twenty7tec said there was a risk of a “two-salary ceiling” putting homeownership further out of reach for “ordinary working households”.
It found that 59% of first-time buyers earned less than £60,000, and with the national average wage at around £37,800, double-income households were challenged by affordability.
Nakita Moss, head of lender from Twenty7tec, said: “Increasingly, the answer is found not in higher earnings, but in outside help.
“Many first-time buyers are on modest incomes, even as they reach their late 30s, which leaves very little room for error when it comes to affordability. This has led to people having to wait longer to save a deposit, often skipping smaller flats and moving straight into family-sized homes as they juggle career progression with starting families. From this, advisers are having to reassess how they guide clients on long-term affordability and risk.”
Average house prices in the UK are currently around £290,000, and wage growth has not managed to keep up with living costs and lending policy, the firm said.
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Twenty7tec suggested that even with a joint income of £60,000, this limited first-time buyers to a mortgage of around £270,000 and in need of a deposit of £30,000 to afford a typical home.
However, with average prices as high as £440,000 in some regions like the South East, many first-time buyers were still priced out of homeownership.
Also, values in cities like Leeds and Manchester are seeing significant rises, driven by increased investment and people relocating from London due to lower property prices.
Twenty7tec said this was impacting how and where people bought homes, and even with measures like stamp duty relief for first-time buyers, the issue of affordability remained.
A generation ‘priced out of homeownership’?
Moss added: “When considering each of these factors, we predict that those stuck in ‘Generation Rent’ will choose unconventional methods to get on the ladder. We are already seeing a steady rise in group mortgages, with friends or family members buying together, as well as intergenerational households and co-ownership living models.”
Twenty7tec’s data also showed that around 15% of first-time buyers were over the age of 40, and the share of those aged 51 and over had risen by 80% in the last five years.
Moss said: “Longer-term lending is no longer a niche product but an essential tool, with many mortgages now stretching well into retirement. For advisers, it means adapting conversations with clients, helping them think not just about getting onto the ladder but about sustaining affordability throughout the lifetime of the loan.
“What concerns us is that if the two-salary ceiling becomes the new normal, what other implications can this mean for buyers, especially second-steppers and those looking to buy in later life? One thing is for sure: the traditional path to homeownership is being redefined, and without intervention, could we see an entire generation priced out of homeownership altogether?”
