Nationwide mortgage affordability report

This is of very little surprise to me personally. I have clients who are currently house hunting but have had to revise their price range as a result of the significantly higher mortgage payments. A client who was buying at £375,000 in May last year until the transaction fell through, is now only able to look at properties with a maximum value of £335,000 and the resulting mortgage payments are still £100 more a month with the same percentage deposit.

The results of the report comes as no surprise. Clients that are currently facing rising rents are now struggling to save more than ever. We are also seeing buyers having to reduce their budget as they are now looking at higher monthly payments than what they were previously. This is why mortgage brokers are so important. If your goal is to get on the property ladder, teaming up with a good broker can open up options for home ownership that borrowers themselves don't always know about, including lower deposit schemes.

If you couple this with rapidly rising rents, in some regions of 20% a year, the prospect of getting a deposit together without the help of a rich benefactor looks bleak. All I can suggest is to talk to a mortgage broker early to come up with a savings goal to make maximum use of the wide range of smaller deposit schemes available. Fail to plan, plan to fail.

The Nationwide's report confirms everything we're seeing at the coalface. Borrowers are becoming more cautious, and neither want or are able to borrow as much as they did just a few short months ago. I believe house prices will fall further and more quickly than most high street lenders are forecasting. The concensus seems to be a 5-10% drop in 2023. This is in spite of the fact the Halifax, the UK's largest mortgage lender, have reported a 3.9% drop in just the past two months. alone. I think we'll see a 15-20% decrease this year, with maybe another 5% fall in 2024.

First-time buyers are currently in a vicious circle. They have to decide whether they stay with mum and dad to save for a deposit or live their life and rent in this unaffordable market and possibly not become homeowners until they're in their 50s.

This is hitting many people hard, however, landlords are feeling the pinch. Today I looked at a remortgage for a landlord and his rate has doubled with the current rental income and associated fees, he is making £12.50pm on the rental income. So you can see why so many landlords are fleeing the market.

Its always been difficult for anyone to save up enough for a deposit, with the way the cost of living is now, it's even more so. What does this mean? Longer waits for those who were nearly there. Some may have had to spend that deposit due to costs going up. Some will have made their deposit, but now want to wait in case they need it for financial stability. The sudden rise in the cost of living has shaken people's faith in everything the government does. They are not thinking that maybe they are not doing everything quite as perfectly as they hoped. A gradual rise with a good explanation may not have stalled inflation quite so abruptly, but it may have helped people understand and prepare. Affordability has been hit, and house prices will slow or plateau due to it. Lower prices homes will sell faster and this means fewer city purchases.

This is desperately sad, but unsurprising. Everything seems stacked against the first-time buyer now, especially as the Help-To-Buy equity loan scheme was closed too, with no replacement in sight. The reality is that we haven't been building enough houses for years now, so the available stock is becoming unaffordable to many. The simple solution is to build more homes, but with the large national housebuilders seeing more benefit in keeping supply constrained, so that prices remain high, there is little chance of that without government intervention. Lenders have responded, as best they can, by tweaking their affordability calculations, to offset some of the cost-of-living increases, but they can do little to mitigate the current price of property.

With a lack of schemes out there for first-time buyers, they are facing tough times ahead without question. There is a real risk of negative equity with 5% and maybe even 10% deposits in some areas. Decade-high interest rates should they be able to muster up the deposit, but with many facing house prices that require loans of 7x-8x their income. Couple this with rising rents once landlords start feeling the pinch.
It's unfortunately a 'perfect storm' and many first-time buyers will be stuck in this vicious cycle without an immediate end in sight. I would urge any aspiring first-time buyer to speak to a broker as early as possible to get a plan of action together.