42% of renters in the UK believe that they will never be able to afford their own home

April 17, 2015

While getting a foot on the property ladder continues be an increasingly high profile subject, new research from Mintel reveals a significant 42% of renters in the UK believe that they will never be able to afford their own home and just 17% are saving for a deposit on their first home. Overall, only 16% of renters are likely to take out a mortgage in the next 12 months.

However, despite the strong belief in lack of mortgage affordability, the same research finds just 5% of renters have investigated government-backed affordable housing schemes such as help to buy or shared ownership.

Jessica Morley, Financial Services Analyst at Mintel said:

“For many Brits, home ownership seems like an impossible dream. These negative attitudes among renters are dangerous for the overall growth prospects of the mortgage market, as those who believe that home ownership will never be possible for them disengage from the process and do not pay attention to deals or schemes that could help them get a mortgage and take their first step onto the property ladder.”

Just 5% of renters have investigated government-backed affordable housing schemes such as help to buy or shared ownership

Furthermore, Mintel’s research also highlights that if saving for a deposit takes too long it can have a negative impact on home ownership intentions. Indeed, currently just 17% of renters are saving for a deposit on their first home, rising to a third (33%) of under-35s. But whilst 34% of renters aged 25-34 don’t think that they will ever be able to afford their own home, this jumps to 46% of those aged 35-44, implying that the longer it takes to reach the savings goal, the more unattainable it appears.

“Negative attitudes towards home ownership could be combated if more lenders worked with savings providers and government initiatives to help renters take proactive steps towards saving for their first home. One option would be for lenders to work more closely with savings providers, particularly those that have accounts for younger clients, and contact existing customers as they enter the working world with advice on how to take a long-term, proactive approach to future home ownership. Specific savings products could be designed to support the advice provided.” Jessica continues.

“The other advantage of this approach is that it provides mortgage providers with more data, over a longer period of time, enabling them to conduct a more thorough and realistic affordability assessment. This could help dissipate some concerns about the credibility of first-time buyers which is currently preventing these potential mortgage owners from being offered the best possible rates.” Jessica adds.

Overall, a fifth (20%) of UK consumers are considering taking out a mortgage in the next year, and there has been a decreasing appetite for mortgage applications over the last few years. Just under a quarter (23%) of consumers were looking to take out a mortgage in 2012 and 21% in 2013. Meanwhile, 55% of current mortgage holders say they are unlikely to switch or re-mortgage in the next 12 months.

Furthermore, more than one in ten (12%) mortgage owners* felt that they did not have an adequate choice of lender when they last arranged or rearranged their mortgage, while slightly less (10%) felt they did not have adequate choice of product ie, a wide range of offers or rates to choose from.

“The fact that one in five Brits is considering taking out a new mortgage shows there is still a strong level of demand for new mortgages. However, the gradual fall in applications is likely to reflect a combination of effects, including a stabilising of the market after its dramatic resurgence following the economic recovery and hesitance stemming from high house prices. But despite this demand, there remains a wide variety of people who still have either limited or no choice when it comes to mortgage lender selection and products.” Jessica continues.

Finally, when it comes to understanding the products available, 70% of mortgage owners* believe they understood every stage of their mortgage application, while the same number (70%) of mortgage owners believe that they know what to do if payments become difficult. This still leaves as many as 30% of mortgage owners who are unsure of what steps would be necessary if payments become difficult.

“Lenders will need to plan for a potential spike in borrowers getting into payment difficulties following the first interest rate rise and may wish to consider contacting all borrowers with information on how to seek advice if necessary as soon as the rise occurs.” Jessica concludes.

*mortgage owners who had purchased a mortgage in the last five years.

Press review copies of the Mortgages, UK 2015 report and interviews with Financial Services Analyst, Jessica Morley, are available on request from the press office.

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For the latest in consumer and industry news, top trends and market perspectives, stay tuned to Mintel News featuring commentary from Mintel’s team of global category analysts.

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