First-time buyers held back by rising living costs

The ability of first-time buyers to get a foot on the property ladder improved slightly last year, but many are still being held back by the rising cost of living.

Research by RBS, outlined in its Ability to Buy Index, found that first-time buyers’ ability to purchase a property increased by just 1% in 2011.

This is despite falling house prices and the stamp duty concession, which gives first time buyers a break from paying the 1% tax if they are purchasing a property worth up to £250,000.

The small in increase in the ability to buy has been largely attributed to the rising cost of living in the past year. First-time buyers’ earnings were found to have increased last year, but high inflation meant that many struggled to come up with the money required to purchase a mortgage.

“The RBS Ability to Buy Index improved by 1% in 2011 to its best level since 2009. But the size of improvement was hindered by higher living costs,” said Fionnuala Earley, UK Consumer Economist at RBS Group.

“More simplistic measures of affordability suggest a much bigger improvement than this. But by including living costs we get a much more accurate picture of the real ability to buy. Without the surge in prices of essentials, particularly transport, first-time buyers’ ability to buy would have improved to 2003 levels in 2011.”

High inflation last year meant that the amount of first-time buyers’ incomes which could be used to save for a deposit or make mortgage payments was lower than in 2010.

“A typical UK FTB will still have to save for almost three years to raise a 10% deposit, even after taking into account further modest falls in prices,” added Ms Earley.

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3 thoughts on “First-time buyers held back by rising living costs

  1. My son is 34yrs. old earning £24,000p.a. pays nearly £600 p.c.m. rent on a pretty average flat. And unless I can help him find substantially more than a 10% deposit has no chance of ever getting on the home owners ladder. Short of staying on his own every night, walking everywhere and not eating he will never be able to make the repayments never mind raise a deposit. Someone on there own with average earnings has very little chance of buying there own home. The costs of living and property are the main problems, not raising a mortgage.

  2. Agree slightly with kendafish, but was it really any easier paying your mortgage in the first years when you bought your first home? I’d guess not, as it’s kind of natural. My issue on not having bought is that my employer decided to make my role redundant. Still, better to know that BEFORE I signed up for the mortgage than find out AFTER !!

  3. I agree! I have a property that was rented out to a local couple after I moved area – which I now want to sell. They are both working (one part-time)and are unable to raise the funds for a deposit. After spending £80 per month on council tax, £385 per month on the house, and all their gas, water, electric, fuel (especially fuel), car purchase and maintenance and road tax, phone bills, childcare, food and essentials, there’s not much left over. I’d love to have sold the house to them but it’s not going to happen. A cut in stamp duty doesn’t help them until they’ve got a deposit. It also doesn’t help me sell the house either. The cost of living is RIDICULOUS – especially the outrageous COST Of FUEL, and no-one’s dealing with that aspect. It’s all stuff that too far down the line to actually be useful. If the government wants to encourage more first time buyers and boost the housing market it needs to be slashing living costs and putting all the money we dole out in foreign aid into the wellbeing of people in the UK instead.

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