As Help to Buy ends, where can first-time buyers turn in a cost-of-living crisis?

This is despite young or first-time buyers currently facing some of the toughest housing market conditions in decades, with house price growth far outpacing wages.
 

Unaffordable housing?

In fact, the average UK house price in July 2022 was £293,324, versus £55,328 reported in the same month of 1992. That means buying a house is more than four times more expensive now than it was 30 years ago.

Contrast that with wages only a little over doubling across the same period, and the difficulties young or first-time buyers face are obvious.

As a result, the average UK household’s annual income is now only equal to a little over 10% of the average UK house price. Whereas in 1992, it was almost 27%.

And with no current plans to extend or replace the Help to Buy scheme, it could mean hundreds of thousands of potential future buyers are left without the support they need.
 

Some of the options buyers now have

There is, of course, still external support available. A lack of Stamp Duty, for example, will help some first-time buyers in England and Northern Ireland. And the recent changes to Stamp Duty will help others.

But the average deposit needed from a single first-time buyer is more than £74,000. And a maximum Stamp Duty saving of just over £2,000 on a house worth £293,324 – which was the average house price in July 2022 – will have limited impact.

Especially when it’s compared to the ceased Help to Buy package, which offered a five-year interest and repayment-free loan of up to 20% of the purchase price.

It might, then, be worth considering a lifetime ISA, the mortgage guarantee scheme or shared ownership as a possible way help aspiring homeowners.

However, not everyone falls within the criteria or has the funds readily available to take full advantage of those programmes.

So how else could a young or first-time buyer find the support they need to take their first step onto the property ladder?
 

The Bank of Mum & Dad

If you were fortunate enough to purchase your property in the 1990s, homeownership opportunities may have seemed much more attainable than today, with house prices more in line with the average UK annual income.

But more than that, you’re likely to have benefitted from the exponential house price growth we’ve seen over the last few decades.

This could mean that you may now be sat on large amounts of wealth tied up in the value of your home. Reports state that over-55s have a collective property wealth of £4.4trillion in the UK.

So, rather than watching a loved one trying to overcome the sizeable gap between annual income and house prices, you could provide the support they need to make homeownership a reality – by accessing some of your own property’s value.
 

Downsizing

Downsizing is a core part of retirement planning for many and has been a common way to help raise funds in later life. According to recent research conducted by Key Group, more than 1 in 4 over-45s plan to downsize in later life, with almost the same yet to make a decision.

And from the 1,000 homeowners surveyed, almost 10% plan to do so to free up some extra cash in order to provide a financial gift to their loved ones.

You may be planning to downsize to provide financial support for your family yourself. However, research shows that only around 1 in 5 downsizing transactions end up with the householder in a cheaper property with fewer bedrooms.

Meanwhile, a similar number, around 1 in 6, actually end up in a more expensive house with more bedrooms. And around a quarter are no better off than before, ending up in a similarly-priced home. Alongside that, the cost of moving home is also underestimated. More than 7 out of 10 people either don’t know how much it costs to move home or believe moving home will cost up to £10,000.

But according to Which?, the average cost to move home in October 2021 was almost £12,000.

That means if you do choose to downsize to help free up funds to support loved ones, you may not only have to face the hassle of moving and end up failing to secure a cheaper property elsewhere, but you may also face higher-than-expected costs which will reduce the financial benefit.
 

Equity release could provide a solution

Another way you could help a loved one onto the property ladder is through equity release.

Equity release allows homeowners aged 55 or over access tax-free cash from their property without the hassle of moving home. And in the first half of 2022, 1 in 5 people took out equity release to gift money to their family – including for house deposits.

With a lifetime mortgage – the most popular form of equity release – there are no mandatory monthly repayments. That means if you’re one of many whose later life finances have been tested through the current cost-of-living crisis, your monthly outgoings won’t be further stretched by equity release.

Other benefits include interest rates fixed for life, so you’re protected against any further market volatility and you retain full ownership of your home.

You can also never owe more than your home’s worth, or pass on any debt through equity release.
 

The importance of expert advice

But the need for expert equity release advice is crucial. At Key, we have more than 20 years’ experience providing over-55s with specialist advice. In fact, we've helped more than 1 million people decide if equity release is right for them.

Our equity release advisers will help you balance your current needs with your long-term plans, ensuring you’ve considered all your other options before going ahead.

No matter your needs, we’re here to ensure the decision you make is the one that’s right for you. And if equity release isn’t right for you, we’ll tell you.

We don’t charge anything for our initial advice. You only pay a fee if you choose to go ahead. That’s so you can explore equity release as an option with an expert equity release adviser without it costing you a penny.

If you’d like to find out more about equity release and see if it’s right for you, order your FREE guide by clicking here.

Or use our FREE online calculator here to see how much you could release today.

Equity release reduces your estate’s value and may affect your entitlement to means-tested benefits. Our equity release advice relates to Key-branded lifetime mortgages only - a loan secured against your home. With a lifetime mortgage, there are typically no monthly repayments to make, as the loan, plus roll-up interest, is repaid when the plan comes to an end. £1,299 fee only payable on completion.