The opportunities that are available for hopeful home buyers are fewer than would have been found only a few years ago. According to a recent report from Nationwide, the deposit paid by a typical first-time home buyer would be 105% of the buyer’s average gross yearly income. In addition, the mortgage repayment would take approximately 38% of monthly take home pay. The cost of becoming a homeowner has grown exponentially and there are several factors that have made it so.

The New Year usually brings about a positive outlook as new beginnings bring about new opportunities and new outlooks. There are hopeful viewpoints and certainly homeowners are not the exception. In 2024, many are hoping to find relief from the overwhelming financial strain that 2023 brought them, and others are hoping to avoid the same fate in the new year. Borrowing has grown exponentially expensive and in just two years, homeowners have lost the opportunity to pay interest rates based on an historically low base rate of almost zero at 0.1% to a base rate of 5.25% which is a fifteen year high.

In the final report for the year, Nationwide released their data revealing a decline of 1.8% in the average UK house price to £257,443. Cash purchases remain fairly steady and running above cash buys recorded prior to the pandemic, while those purchasing a home with a mortgage have declined to below 20% of pre-pandemic levels. The higher cost in borrowing is considered to blame for fewer home buyers in the housing market and Nationwide forecasts no growth in 2024, but possible further decline.

There is no doubt first-time home buyers are having a harder time climbing onto the property ladder than the buyers who purchased two years ago. Interest rates are higher, and house prices remain elevated after numerous record-breaking boosts to the average house price throughout the pandemic. Inflation has taken away money from budgets making saving for a deposit more difficult. In addition, many home buyers are coming to lenders with complicated credit histories due to the impact the pandemic had on their earnings.

As the new year comes, homeowners are looking for answers. Questions could cover whether the Bank of England’s base rate will be cut and lower the cost of borrowing, or if the housing market will be resilient against the gloom and doom forecasts of some, or if property values will hold and keep homeowners from falling into negative equity. There are likely many other questions as homeowners navigate the financial landscape of 2024. Unfortunately, there are fewer knowns about the upcoming economy than there was this time last year for 2023.

According to the Office for National Statistics (ONS), UK house prices declined at the quickest rate in more than a decade in the year to October. As would be expected, London, the area with the highest house prices, experienced the greatest decline. The ONS data is being blamed on the higher cost of borrowing as interest rates have increased significantly over the past two years. Not only are home buyers facing affordability issues, but so are homeowners as well.