Unaffordable house prices and strict lending rules mean that an extra 2.2 million people will never buy a home, according to the Building Societies Association.
Their report, First-Time Buyers: The Missing Millions, suggests that if first-time buyer numbers were in line with historic norms, there would have been 7.2 million FTBs since 2006. In fact, there have only been 5 million.
Why aren't first-time buyers coming to the market? The BSA points out three factors:
- The availability of high loan-to-value mortgages has gone down.
- The rise of house prices relative to incomes, especially in the South, means that buyers need to save up large deposits as mortgage lenders will only lend up to 4.5x their income.
- Rising rents make it difficult for renters to save. According to the Office for National Statistics, rental spending peaked at 30% of pre-tax income in September 2024. Perhaps as a result, they say that 79% of tenants have savings of £10,000 or less – not even half the minimum 5% deposit at the average house price of £268,000 in February.
Finding solutions
The BSA recommends loosening mortgage rules so that more buyers can borrow more than 4.5x their income. Alongside that, they say that the long- term solution is for house prices to rise more slowly than incomes.
But that will take time and is likely to come too late for today’s missing first-time buyers. The extra 2.2 million tenants will also need a sustainable private rented sector with plentiful housing stock – and if more landlords are selling than buying as is widely reported, they are likely to face tough competition for homes and rising rents instead.
