Do today’s homebuyers face bigger challenges than previous generations? - Ben Merritt

During this process, one result in particular stood out – the perception the majority of people have about today’s homebuyers. Two thirds, 66 per cent, of those asked agreed with the statement ‘earlier generations have had it easier when buying a home’.

We also canvassed opinion on the statement ‘today’s homebuyers and movers face significant challenges’ – and a massive 77 per cent agreed that this was true, further indicating the hardship buyers feel they face now compared to previous decades.

With the backdrop of a rising rate environment, inflation levels not seen since 1981 and the cost-of-living crisis all working against those wanting to move onto or up the property ladder at any time in the near future, it’s perhaps no surprise we’re all guilty of thinking of the here and now in isolation.

Indeed, we can’t ignore the findings in our report – a quarter, 27 per cent, say the current crisis is preventing Britons at all stages of the property ladder from buying a home, which rises to a third, 33 per cent, for first-time buyers. A fifth, 22 per cent, also cite the current economic volatility as keeping them from making a purchase.

This is all very concerning for those looking to purchase right now. However, if we look at the last decade, until this year, interest rates were at a historical low, and mortgage interest rates reflected this, so it’s possible that we’ve become accustomed to borrowing extremely cheaply and the sudden shift this year has been a big shock to us all.

The average mortgage interest rate was 5.60 per cent between 1995 and 2022, with a high of 8.87 per cent in 1998, so we could argue that, until recently, previous borrowers faced more significant challenges in this regard.

That said, the average asking price for a house in August 2022 was £295,903 – compared to just £55,762 in December 1995 - over a 400 per cent increase – so borrowers may well have been facing much lower monthly mortgage costs relative to wages, compared to today’s homebuyers. And what if we go back further in time? It’s definitely true that earlier generations faced other challenges, and house-purchase may not even have been high on their agenda. For example, the post-war period was fraught with rationing and food shortages, which did not end completely until 1954.

Later, in the 1970’s, other challenges included unemployment and large-scale trade union strikes, causing much disruption to daily life, so each generation can argue they’ve had their own unique worries to face.

There’s also the question of expectation, and how this may have changed over the decades.

During the first world war (1914-18), only around 10 per cent of people owned their own homes, rising to over 40 per cent by the 1960s. By the 1970s views were changing, and the desire to own a home was growing in the population. Fast forward to current times and owning your own home is something that most people aspire to – it’s a goal, a dream to be achieved. Three quarters, 77 per cent, of first-time buyers we spoke to as part of research last year agreed that owning their own home was essential to feeling they had succeeded in life, demonstrating the increasing weight of expectation the more recent generations feel.

An increase in expectations isn’t necessarily a bad thing though – it points to progress, but we also need to temper this with realism. We found that four-in-five first time buyers, 79 per cent, expect their first home to meet all of their needs – a view which changes drastically by the time they are ready to purchase their next one, and reinforces that the first-home probably doesn’t tick all the boxes as hoped, given their later need to move.

As to whether earlier generations have ‘had it easier’ when buying a home certainly feels difficult to argue with in the current climate. That said, it could be argued that most people will focus on this because it’s currently front and centre in all of our minds. Nonetheless, we should be focussing on what we can do about this statement if it’s how people are feeling. How can we guide the younger generations, and help those already on the property ladder but struggling to go further?

Our Housing Britain report highlighted several possible solutions that would assist home buyers – including scrapping stamp duty or extending government support.

It’s essential that these concerns are taken seriously by the government – people are clearly feeling disillusioned about the challenges they face and their ability to own their own home in the world we live in now, and, regardless of whether this is more difficult than in the past – something must be done to reassure them.

Ben Merritt is the director of mortgages at Yorkshire Building Society.