Becoming a homeowner is hard. At least this is the case for more than one third of first-time home buyers. According to information released by the Office for National Statistics (ONS), between April 2022 and March 2023, 36% of first-time buyers had used financial gifts to purchase their first home. Twenty years ago, only 20% relied on financial gifts to purchase their first property. Another 9% reported relying on inheritance to climb onto the property ladder, while only 3% reported twenty years ago depending on their inheritance to become a homeowner.

With 36% using financial gifts and 9% relying on inheritance, almost half of first-time home buyers are depending on money not earned within the household. It is not a surprise due to the obstacles of UK home buying.

Interest rates have risen in the last two to three years and while interest rates rise and fall according to the state of the economy, current interest rates have risen along with years of inflation on the heels of a global pandemic. 

The global pandemic impacted many households, and during the lockdowns and difficulties the Bank of England’s Monetary Policy Committee (MPC) lowered the standard base interest rate to an historic all time low of 0.1%. At almost zero it was the cheapest interest rate for the UK in over 300 years. 

Pandemic or not, lower consumer confidence or not, hopeful home buyers were drawn to the lowest lender mortgage rates in generations. Coupled with the pandemic lifestyle requiring more room in the home which might include space to work from home, an area for home schooling, and workout areas, a buying frenzy began. No more were expensive city properties the prime estate market, but once overlooked country cottages and rural homes with outdoor green spaces for family, children and pets were met with strong demand from buyers.

Demand remained for years. House prices rose to break records many times over. Spending grew as people emerged from lockdowns and the restrictions of the pandemic along with supply chain issues caused by the pandemic and the war in Ukraine created an inflation rate that would grow to double digits in 2023.

Hopeful home buyers in 2024 no longer have the cheap interest rates of only years ago, but house prices remain nearly the same as the peak of 2022. Meanwhile, years of inflation and high energy prices have robbed hopeful home buyers of the ability to save for a deposit. 

Inflation may be declining, as it was recently reported to reach 3.6% after months of being stuck at 4.0%, but the relief will not be felt by consumers for some time. The target inflation rate of 2.0% may be met this year and the current standard base rate of 5.25%, the highest in sixteen years, will likely be cut, but it won’t return to the pandemic historic low of 0.1%.

It’s not easy for home buyers. According to a recent report, it can take ten or more years for a household to save for a deposit. No wonder friends and family need to come to the rescue to help with a purchase. 

With forecasts for the housing market to remain resilient there is little hope of house prices dropping to a more affordable level seen prior to the pandemic buying boost. If the expected three rate cuts by the MPC occurs this year, the rate would only reach 4.75% and while it is better than 5.25%, it will remain to be seen what lenders offer in mortgages.

Home buyers are not the only borrowers hurting in their financial strategies for 2024. Homeowners coming to the end of their current mortgage deals could be coming off historically low fixed rate two-year deals into the remortgage offers set by lenders while the base rate is the highest in over a decade and a half. 

At the expiration of their term and the end of their current rate they will have the option to remortgage or be transitioned to the lender’s standard variable rate (SVR) which is risky and likely higher than what could be found with a remortgage deal. Their current rate could be lower by more than half than what they will choose from on the lending market, and a SVR could be more than triple the rate they had been paying.

Money requirements to stay on the property ladder could be as difficult as getting onto it. 

Luckily, there are paths to help. For homeowners, shopping for a remortgage is encouraged and avoiding a SVR. While remortgage lending won’t reflect 2022 or 2021 rates, avoiding a SVR could save the homeowner a substantial amount of money. 

For home buyers, there are friends and family that might be willing to invest in their future. There are other creative ways to buy, such as choosing from cheaper fixer upper properties to turn into a dream home despite not resembling one in the start. Other home buyers might consider a property that allows income from renters as their family grows into the space.

It is hard to become a homeowner, and during some economic situations it is hard to stay one. Learning to be creative as a home buyer could help one remain focused on the coming years when the first mortgage deal nears the end and financial strategies are required once again as a remortgage becomes the path to continued affordability.