CML: Age of FTB

geneer

http://www.cml.org.uk/cml/publications/newsandviews/45/152

Thousands of newspaper columns have been printed about the difficulties facing young people trying to buy their first property in the UK. In the boom years, rising prices were understood to be forcing young people to save for longer to raise a deposit and/or achieve greater incomes to get a mortgage.
More recently, although house prices have fallen, lenders have tightened both income multiple and loan-to-value (LTV) criteria in response to the deteriorating economy and shortage of mortgage funding. As a result of this, you guessed it, young people should have to save longer for larger deposits and achieve greater incomes to get a mortgage. In both cases, the common perception is that first-time buyers must be getting older. But are they?
Our monthly Regulated Mortgage Survey (RMS) shows the profile of first-time buyers throughout the UK. This reveals that since 2005, the median age of a first-time buyer has not changed (aside from insignificant fluctuations). We use medians when looking at typical buyer characteristics because with large data sets, such as the RMS, median statistics can better reflect typical behaviour and also help to control for any outlying (abnormally small or large) figures.
But just in case you think the median age is suspiciously static, the mean figures have stayed equally immobile, although the mean first-time buyer age is about 31, compared to a median of 29.

Average age of first-time buyers



Source: CML
So, if first-time buyers aren’t getting any older (or younger), despite logic suggesting otherwise, why is this? We need to delve further into the data to learn more...
In previous CML research we found that an increasing number of first-time buyers were getting help – most likely from parents or grandparents – to raise funds for a deposit. The latest estimates indicate that around 80% of young first-time buyers are getting help in this way.
Clearly drawing on your family for a deposit can help you get on the housing ladder earlier than if you had to save for the deposit yourself. So it follows that the growing incidence of assistance may be keeping down the average age of first-time buyers overall.
But what about those who do not get help?
Borrowers’ age profiles tend to evolve very slowly, but when we strip out those borrowers identified as having received help, a striking pattern emerges. Up until late 2007 - around the time the credit crunch began – the average age of first-time buyers excluding those getting help, was fairly stable at around 33. But since then, the average age has risen very sharply and now stands at around 37.
Average age of first-time buyers (excluding those receiving assistance)


Source: CML
Even when house prices were rising rapidly, credit was relatively easy; so many young people remained able get on the housing ladder without family help through higher LTVs and income multiples.
However, lending criteria have been scaled back to such an extent in the credit crunch that it has become exceptionally difficult for young people to get a mortgage without external help for a deposit. And without that assistance, those buyers would be considerably older before they had the financial wherewithal to get a mortgage, and the average age of first-time buyers would be significantly higher.
In recent months lending criteria have begun to ease somewhat. And whilst the average age statistics will probably not change, underneath the surface it is likely that that those young people not lucky enough to receive help from family, will not have to wait quite so long before getting a mortgage.

geneer

Bank of mum and dad.

But that doesn't mean the challenges for first-time buyers are over. Newly updated CML analysis suggests that around 80% of first-time buyers aged under 30 are likely to be receiving help from parents as they are unlikely to have been able to build up the deposits needed to enter the market from their own resources.

ruggedtoast

Gosh, you are like a frenzied marmot hurriedly making a nest today, with all your posts.

ukcarper

Is this really surprising up until 2007 people thought they would be able to get a 100% mortgage so didn’t save now they need at least 10%.

IveSeenTheLight

geneer wrote: »

Bank of mum and dad.

With generally parents being older and wiser, is it any significance that parents offer that wisdom to their children and relise that buying is far better than renting in the long rung and are happy to help towards a deposit?

In the past, parents have helped with first cars etc, so why not for a deposit?

I'd rather be able to offer my kids support if I can than see them live years in renting paying off someone elses property.
Better they have it earlier in life than at the end of it.

nollag2006

IveSeenTheLight wrote: »

I'd rather be able to offer my kids support if I can than see them live years in renting paying off someone elses property.
Better they have it earlier in life than at the end of it.

Exactly the reason why I bought a couple of BTLs in May 2009, shortly after the birth of my twins.

Rental yield has risen from 5 to 7% in that short time, and the capital value is well up on the purchase price as well.

It's nice also to think that tenants are paying off the mortgages for me over the next 18 years.

Even assuming a bit of CGT on the likely gains, it'll still give the girls a nice little start in adult life.

geneer

IveSeenTheLight wrote: »

Better they have it earlier in life than at the end of it.

Presumably you would therefore be all to happy to see house prices revert to historical norms then.

Or do you think it should only be better for winkies with rich mummies and daddies?

Ilya_Ilyich

Older people have more time to accumulate capital, older people are becoming an increasingly large segment of the population, so the proportion of capital held by the young is decreasing. As the capital held by the old grows they can mold society in such a way as to increase their rate of capital accumulation while raising barriers to entry for the young. So we have older people who hold most of the capital, structuring the system to improve their advantage while increasing the disadvantage of the young, so it follows that the rate of capital accumulation for the young will continue to decrease and the mean time to accrue sufficient capital to exchange for property will increase (without assistance from the older, capital-holding class).

robmatic

IveSeenTheLight wrote: »

With generally parents being older and wiser, is it any significance that parents offer that wisdom to their children and relise that buying is far better than renting in the long rung and are happy to help towards a deposit?

In the past, parents have helped with first cars etc, so why not for a deposit?

I'd rather be able to offer my kids support if I can than see them live years in renting paying off someone elses property.
Better they have it earlier in life than at the end of it.

I don't see why people have an issue with BOMAD. You work hard all of your life so you can either:

a) retire early and and fritter away all of your accumulated wealth on cruises and futile cosmetic surgery; or

b) provide for your family

And on this forum option (b) is the morally dubious choice.

nollag2006

robmatic wrote: »

I don't see why people have an issue with BOMAD. You work hard all of your life so you can either:

a) retire early and and fritter away all of your accumulated wealth on cruises and futile cosmetic surgery; or

b) provide for your family

And on this forum option (b) is the morally dubious choice.

or

c) Sell up your home and buy nice bars of gold in case the sky falls in.

For many on here, that seems to be the preferred option

geneer

robmatic wrote: »

I don't see why people have an issue with BOMAD. You work hard all of your life so you can either:

a) retire early and and fritter away all of your accumulated wealth on cruises and futile cosmetic surgery; or

b) provide for your family

And on this forum option (b) is the morally dubious choice.

Its a bit predictable that the bulls sell getting bailed out by Mumsie and pops is the only way to go.

Actually, its clear that a lot of parents worry about their kids getting a foothold, only unlike the Bulls they were only to happy to see some normality brought to house prices in the Crash.