February has been a month of difficult news for aspirant homeowners.
The Financial Times reports that inflation has reached the highest level for 30 years at 5.5%. The cost of living crisis and the hike in energy prices is biting with the UCL Social Research Institute suggesting that families are having to choose between food and staying warm as energy prices rise.
James Prestwich, director of policy and external affairs at the Chartered Institute of Housing this month said that “pressures on affordability for those trying to get onto the housing ladder for the first time or to rent a home will not be helped by the rising cost of living.”
In terms of house prices, the ONS reported that they reached record levels in December 2021, pushing the deposit requirements higher still. Rental prices are no better, with The Guardian noting that they are rising at their fastest rate in five years. The team at JustBuildHomes reminded us that it will cost you at least seven times your salary to buy your first home – eleven times your salary if you want to buy in London.
For those able to start thinking about mortgages, The Telegraph had more bad news, saying that the best mortgage deals have disappeared, with banks raising interest rates. Nationwide figures highlighting worsening affordability in most parts of the UK was backed by ONS data illustrating why homeownership stays out of reach for many would be owners.
These factors have combined to create a difficult environment for first time buyers. According to Mortgage Strategy magazine, the uptake of First Homes remains patchy and there is a significant decline in Help to Buy purchases as the issue of raising a deposit becomes more challenging as the cost of living and housing increases rapidly. This ‘deposit barrier’ is the golden thread that ties these stories together.
Robert Colvile in the Sunday Times last week reported that the average deposit jumped from 102% of average income to a record 110%, and that in London it would take the average worker more than 15 years to save for a deposit at today’s rates. He also said that “Being able to own your own home is the essence of the good life” and discussed this crisis “poisoning the dreams of a generation.”
Despite this, there is some positive news for first time buyers. Over the past few months, Rentplus has continued to turn its renters into homeowners. Those first Rentplus tenants who moved into brand-new homes in 2016 with no deposit, on a 5-year agreement have now bought their homes. They paid affordable rent (80% of local private rents typically) to our housing association partners, giving them the ability to save at least the 20% difference. For many that was about £200 a month.
The following years have seen their savings grow and boosted by the 10% gifted sum from Rentplus on purchase, has given them real equity in their home from day one. They accessed high street mortgages with good deposits to fund the purchase of 100% of their home and the 2017 cohort are on track to purchase their homes too.
With all these challenges facing the latest generation of prospective homeowners, it is no surprise that we are seeing a massive uptick in interest in our services and affordable rent to buy in general. In some places, Rentplus home can be massively oversubscribed – with over 300 applicants bidding for 6 houses.
To facilitate growth and deliver more affordable rent to buy homes, Rentplus seeks new partnerships with local authorities local authorities who want to see their waiting lists reduced, housing developers and housing associations who want to offer an increased tenure and their income boosted with low-risk external investment.
All this means that, with continued cooperation, the needs of a generation of prospective first-time buyers can continue to be met. There is a silver lining, after all, to a situation which, at first glance, looks hopeless.