The New Mortgage Charter

Last month’s cut in the Bank of England Base Rate, along with better job and growth prospects, offers a bit of hope for first-time buyers. However, the deep-rooted issues in the UK housing market are still very much alive. The UK has been grappling with a persistent housing crisis for decades—a crisis that, as the 2021 Census highlighted, is more severe in some areas than others. Supply remains a huge issue, making affordability the top concern for anyone trying to buy their first home.

Earlier this year, a report by the BSA, supported by some of its largest members and the Intermediary Mortgage Lenders Association, stated that becoming a first-time buyer is likely the most expensive it’s been in at least 70 years.

This isn’t just speculation. A separate survey by Nationwide found that one in five prospective first-time buyers don’t think they’ll be able to purchase a home until they’re in their forties. With the average age now being 33, this isn’t exactly a shock. There’s more competition than ever for smaller homes. The 2021 Census showed that single-person households in the UK have skyrocketed, partly due to an ageing population. As of last March, 18.6% of the population was aged 65 and over, up from 16.4% in 2011. And nearly one in three UK households (30%) are now made up of people living alone, with women over 65 making up 70% of these solo households.

This scramble for smaller, newer homes only worsens the problem. It’s no wonder Labour’s manifesto briefly touches on first-time buyers but primarily focuses on building more homes. It mentions giving first-time buyers the first shot at new homes and stopping entire developments from being sold to international investors before they’re even built. Labour also plans to introduce a permanent, comprehensive mortgage guarantee scheme to support first-time buyers.

There’s a clear need for more help. The BSA reported that the number of homeowners with mortgages has dropped by over two million since its peak in 2002. Affordability challenges often mean that people now need two above-average incomes and financial help from family just to buy their first home.

The current housing stock just isn’t cutting it.

While focusing on the lack of supply is crucial, it’s not a quick fix. But younger buyers are drawn to new builds, and it’s easy to see why. Earlier this year, a report revealed that in January, 65% of all first-time buyer inquiries were for new builds, a 16% jump from last year.

New builds don’t come with an upward chain, reducing the risk of delays and last-minute disruptions—an attractive prospect given how stressful the home-buying process can be.

With rising energy costs and growing environmental concerns, first-time buyers are increasingly prioritizing energy efficiency. New builds, constructed with the latest energy-saving technologies and materials, promise lower utility bills and a smaller environmental footprint, which can save money over time. This isn’t just a nice-to-have—especially considering the potential costs of retrofitting older homes to meet upcoming environmental regulations. Research from last year by the Home Builders Federation found that energy bills for new homes are on average 55% cheaper, saving households £135 a month. Over 80% of new homes boast top-tier A or B energy ratings, which can also mean access to cheaper loans.

According to AA Home Insurance research, the features homebuyers are most interested in including gardens and off-street parking—not something typically found in aging inner-city terraces.Where there’s a challenge, there’s an opportunity.

Brokers usually step in when a client is ready to buy, but when it comes to first-time buyers, earlier advice could make all the difference. Affordability remains the biggest hurdle, especially with limited supply and the ongoing cost-of-living crisis. Saving up a big enough deposit is still the most significant barrier to buying that first home, but early planning can help ease this challenge.

The Bank of Mum and Dad has been much discussed, and while not every parent can gift or loan money, there are other ways families can help. Some lenders offer joint mortgage sole proprietor schemes or guarantor mortgages, allowing parents to use their savings or property as collateral or provide a gifted deposit.

With Help to Buy no longer an option, other schemes like Deposit Unlock, First Homes, or shared ownership might be worth considering. Shared ownership, in particular, is gaining traction, allowing new buyers to purchase a stake in a property (starting as low as 25%) and pay rent on the rest.

Of course, even a decent deposit won’t lower borrowing costs, but if interest rates stabilise, lenders might become more willing to support these buyers—especially if they’re purchasing energy-efficient homes that help lenders meet their Scope 3 emissions targets. The cost of mortgage finance is key, but so is the type of property lenders are willing to finance. We may even see changes to Loan-to-Income (LTI) limits. New housing developments could offer better prospects for everyone involved.

When it comes to funding options, longer mortgage terms might also help. Where 25-year terms were once standard, more first-time buyers are now borrowing for 35 years or more. Some lenders even allow mortgages up to age 80, making it easier to borrow over a longer period. While this means paying more interest over time, it could be the key to getting the home they want now, with the option to remortgage as they pay down the balance.