First time buyers in the UK are more financially focused than those who bought before the credit crunch but the economic turmoil has not dampened their desire to nest, according to new research.
Some 85% of those who bought in the last year said setting up home with their partner was their primary goal, at a time of national financial instability, people are also looking at their homes as an opportunity to improve their finances, says the research from the Yorkshire Building Society.
Its study of over 2,000 potential and existing first time buyers found that despite market conditions, three out of four people who had yet to purchase their first property aspired to own their own home.
It said that this suggests that despite the economic environment more people than ever are looking towards bricks and mortar to provide them with certainty.
Some 45% of those who bought their first home in the last year said they felt property was a good investment, and 49% were prompted to buy as they felt renting was a waste of money. The same percentage of potential first time homeowners agreed with this statement and 50% more said they saw property as a good investment.
First time buyers who bought prior to the fallout from the credit crunch are less likely to agree as arguably they had easier access to credit and fewer financial worries.
With a deposit of approximately £26,000 needed to buy the typical first home, potential first time buyers are now making lifestyle changes in order to save up. In addition, the number of first time buyers who were able to buy as they felt it was ‘the right time for them’ has fallen from 13% to 6%, whereas those who have needed help from family and friends has more than doubled from 4% to 10%.
Some 60% of those who climbed onto the housing ladder in the last year say they set up a regular savings account specifically for their deposit. This is a larger proportion than those people who bought five years ago when it was 41%, and also those with aspirations to buy their first home was 41%.
‘This suggests that while financial prudence was less critical pre-credit crunch, the key to successfully buying your first home at the moment is sensible financial planning,’ the research report says.
Potential first time buyers are also looking to save more in other ways and 8% are cutting back on luxuries such as nights out, with 5% even taking on additional overtime or part time work.
When it comes to financing a first home, prudent financial planning continues to be at the forefront of people’s minds. The largest proportion of recent first time buyers chose the security of a fixed rate product, 51%, with 12% seeking to take advantage of low interest rates by taking out a tracker mortgage.
‘In the last five years mortgage activity in general has more than halved, and today’s first time buyers are facing a squeeze on incomes and pay rates that are not keeping pace with inflation. However, it’s encouraging to see the proportion of first time buyers has actually begun to increase in this period and more people are seeing home purchase as a prudent financial decision,’ said Chris Smith, group direct mortgage manager at Yorkshire Building Society.
‘First time buyers are vital to the housing market, and here at the Yorkshire we are doing our best to help. In the first six months of 2012, we increased our overall net mortgage lending compared to the same period last year, with approvals to first time buyers up 32%,’ he added.