The barriers to homeownership will continue to rise higher locking out thousands of people particularly first-time buyers, according to forecasts from the Office of Budget Responsibility.
The OBR forecast released yesterday (Nov 23) alongside the chancellor’s Autumn Statement showed that the figures will get even higher if the economic crisis persists.
It is forecasting housing transactions to fall by 6.9% in 2024, a decline of 1.9% against their previous forecast in March 2023 (5.0%). And before steadily returning to growth at the end of 2024.
The suggests that conditions are becoming tougher, with even more potential homeowners set to join this group of lost first-time buyers, reinforcing the need for reform of the housing market.
Mortgage lending for first-time buyers is down by almost a quarter in the last year.
Earlier this year Leeds Building Society revealed that 426,000 fewer first-time buyers would be able to buy their first home over the next 5 years compared to the past 40-year average if economic projections play out.
The Society said persistently higher than anticipated inflation levels will continue to exert pressure on aspiring first-time buyers through mortgage rates and their ability to save the necessary deposit to purchase their first home.
Any reprieve from higher rates for first-time buyers in the form of lower house prices has been thwarted, with forecasts updated to show a more modest fall of 4.7% will quickly recover to growth in 2025.
It added that action is required in three key areas to build a market which better supports and empowers first-time buyers.
They include building more homes of all types, increasing affordable routes to home ownership, and supporting people to save for their deposit.
Leeds Building Society chief executive Richard Fearon said: “The greatest influence on affordability for first-time buyers is the toxic combination of rising deposit requirements and mortgage interest rate increases over the last 18 months.
“We recently highlighted that 426,000 people – or 233 per day – will be unable to buy their first home over the next five years if the economic projections became reality. Sadly, the new OBR forecasts reveal homeownership will remain a dream for an even higher number of people.
“It’s no surprise that home ownership has fallen by a third among young people, and that housing transactions are set to fall by 6.9% over the next year, when the hurdles to achieve homeownership are so high.”
Fearon added: “We’re taking steps ourselves to support aspiring homeowners, and we welcome the support brought forward to help the housing sector plus the extension of the mortgage guarantee scheme.
“However, every generation deserves a place to call home, and with first-time buyer affordability at its worst point for many decades, the Chancellor needed to go further.
“Without action we risk creating a lost generation of first-time buyers. We believe the government can, and must, do more to support first-time buyers by building more homes of all types, by increasing affordable routes to home ownership, and by helping potential homeowners save for their deposit.”
