Housing Market broken?

Why Is It So Difficult for First-Time Buyers?

Getting on the housing ladder has become increasingly difficult for many first-time buyers. Saving a deposit is only part of the problem: a buyer must also satisfy a mortgage lender that the loan is affordable.

House prices in many areas have risen faster than wages. At the same time, higher rents, household bills and borrowing costs can make it harder to save. A person may therefore have a 5% or 10% deposit but still be unable to borrow enough to purchase even one of the cheaper properties in their area.

Reports regularly confirm that home ownership is becoming less accessible to younger adults. This is not exactly a startling discovery for anyone who has tried to buy a home recently. Still, the reasons are more complicated than not having saved enough money.

How Much Can a First-Time Buyer Borrow?

Mortgage lenders consider both the amount being borrowed compared with the buyer's income and whether the monthly repayments are affordable.

Many buyers use four to four-and-a-half times household income as an approximate guide, but this is not a guaranteed lending limit. Some lenders may offer more in suitable cases, while others may offer less.

Lenders will consider matters including:

• Income and employment
• Existing loans, credit cards and car finance
• Childcare and other regular commitments
• Credit history
• The size of the deposit
• The proposed mortgage term
• The interest rate and likely repayments
• The property being purchased

UK rules continue to restrict the proportion of mortgages that larger lenders can issue at loan-to-income ratios of 4.5 or more. This does not prohibit all higher-income-multiple mortgages, but it means lenders cannot offer them to every applicant.

Why a Deposit May Not Be Enough

A deposit reduces the amount that must be borrowed, but it does not prove that the buyer can afford the repayments.

For example, a person may have saved £30,000 towards a £300,000 property but still need a £270,000 mortgage. If their income and expenditure do not support that level of borrowing, the application may be refused.

Lenders commonly offer mortgages requiring deposits of at least 5% or 10%. A larger deposit may provide access to a wider range of products and lower interest rates.

Mortgage Affordability Checks

A lender will normally ask for payslips, bank statements, details of debts and evidence showing where the deposit came from.

The lender may also consider whether the mortgage would remain manageable if interest rates or household expenditure increased.

Before viewing properties, it can be useful to obtain a mortgage agreement in principle. This indicates how much a lender may be prepared to offer, although it is not a final mortgage approval.

Longer Mortgage Terms

Some first-time buyers choose a mortgage lasting 30, 35 or even 40 years to reduce the monthly repayment.

A longer term may make the loan appear more affordable each month, but it usually increases the total amount of interest paid. It may also mean that the mortgage continues well into later working life or retirement.

Government Support for First-Time Buyers

There is no single scheme that solves the affordability problem. The available options may help with the deposit or purchase price, but applicants must still satisfy eligibility and mortgage requirements.

The Mortgage Guarantee Scheme

The government introduced a permanent Mortgage Guarantee Scheme in July 2025 to support mortgages where the buyer has a deposit as small as 5%.

The guarantee is provided to participating lenders rather than paid directly to the buyer. It is intended to encourage lenders to continue offering mortgages at up to 95% of the property value.

A 5% deposit does not guarantee acceptance. The buyer must still pass the lender's affordability, credit and property checks, and higher loan-to-value mortgages may carry higher interest rates.

Lifetime ISA

A Lifetime ISA can be used by an eligible first-time buyer to save towards a first home.

A person can pay in up to £4,000 each tax year and receive a government bonus of 25%, worth up to £1,000 a year. The first payment into the account must normally be made before the saver reaches 40.

The account must normally have been open for at least 12 months before the funds can be used for a qualifying purchase. The property price limit and withdrawal rules should be checked carefully, as an unauthorised withdrawal may incur a charge.

First Homes

The First Homes scheme is available in England and allows qualifying first-time buyers to purchase certain homes at a discount of at least 30% below market value. In some areas, the discount can be 40% or 50%.

The discount remains attached to the property when it is sold, so the next qualifying buyer also receives the reduced price.

Local authorities may apply additional criteria, including local residence, employment or key-worker requirements. Availability depends on whether qualifying properties are being built or resold in the area.

Shared Ownership

Shared ownership allows a buyer to purchase a share of a home and pay rent to a housing provider on the remaining share.

It can reduce the deposit and mortgage required at the outset. Still, thee buyer may also need to pay:

• Rent on the share they do not own
• Service charges
• Estate or management charges
• Repair and maintenance costs
• Fees when buying additional shares

Eligibility usually includes an annual household income limit of £80,000 outside London or £90,000 in London, together with requirements concerning existing home ownership and affordability.

Shared ownership should not automatically be treated as cheaper than buying outright. The mortgage, rent and service charge must be considered together.

Rent to Buy

Rent to Buy properties are offered at a reduced rent for a limited period to help eligible tenants save for a deposit.

The tenant may later be able to buy the property, sometimes through shared ownership, but purchase is not always guaranteed. Availability is limited, and local eligibility rules may apply.

Help to Buy Has Closed

The Help to Buy Equity Loan scheme in England is closed to new applications. Applications closed in 202,2 and the completion deadline was in 2023.

Existing Help to Buy borrowers remain responsible for managing and eventually repaying their equity loans, but new buyers can no longer apply under that scheme.

Stamp Duty for First-Time Buyers

First-time buyers purchasing a qualifying property in England or Northern Ireland can claim Stamp Duty Land Tax relief.

The current rates are:

• No Stamp Duty on the first £300,000
• 5% on the portion from £300,001 to £500,000

If the purchase price exceeds £500,000, first-time buyer relief is not available. The standard residential rates apply to the whole transaction.

Different property transaction taxes and reliefs apply in Scotland and Wales.

Buying with Help from Family

Many first-time buyers receive assistance from parents or other relatives. This is often called the "Bank of Mum and Dad", although in practice it may be a gift, a loan, a guarantee, or a joint purchase.

Gifted Deposits

A lender will normally require written confirmation that the money is an unconditional gift and that the family member will not acquire an interest in the property.

The conveyancer will also need evidence of where the funds came from to comply with anti-money-laundering requirements.

A large gift can have Inheritance Tax consequences if the person making it dies within seven years, although this does not normally prevent the money being used as a deposit.

Family Loans

A loan from a family member may affect mortgage affordability because it creates another debt that must be repaid.

The terms should be recorded in writing. The parties should decide whether interest is payable, when repayment is due, and what happens if the property is sold or the buyer's relationship breaks down.

Joint Borrower or Guarantor Mortgages

Some mortgage products allow a parent's income or savings to support the application without the parent necessarily living at the property.

These arrangements can expose the family member's savings, income or property if the buyer fails to pay. Independent legal and financial advice may be appropriate before any guarantee or joint borrowing arrangement is signed.

Buying with a Friend or Partner

Buying with another person can increase the available deposit and borrowing capacity, but the legal arrangements should be considered carefully.

The buyers should decide:

• How much each person is contributing
• Whether the property will be held as joint tenants or tenants in common
• How mortgage and household payments will be divided
• What happens if one person wants to sell
• How improvements and repairs will be funded
• What happens if the relationship ends
• Whether a declaration of trust or cohabitation agreement is needed

Relying on a friendly understanding can cause serious disputes later, particularly where the buyers contributed different deposits.

The Cost of Buying Is More Than the Deposit

First-time buyers should budget for costs including:

• Conveyancing fees
• Searches
• Survey and valuation fees
• Mortgage arrangement or broker fees
• Stamp Duty where applicable
• Removal costs
• Buildings insurance
• Immediate repairs and furnishings
• Service charges for leasehold property

Buying and moving costs can be substantial, so using every available pound as the deposit may leave the buyer without funds for fees, repairs or emergencies.

Buying a Leasehold Flat

A lower-priced flat may appear to provide an affordable route into ownership. Still, buyers should investigate the lease and ongoing charges carefully.

Important issues include:

• The remaining length of the lease
• Current and proposed service charges
• Major works
• Ground rent
• Building safety issues
• Restrictions on alterations, pets or letting
• The financial condition of the management company

A mortgage lender may refuse to lend where the lease is too short or the terms are considered unacceptable.

New-Build Homes

New-build properties can offer modern standards, lower immediate maintenance and access to some first-time buyer schemes.

However, buyers should consider:

• Whether a reservation fee is refundable
• The deadline for exchanging contracts
• Estate and service charges
• Whether the property is leasehold or freehold
• Any management-company arrangements
• Snagging and construction defects
• Whether the asking price includes a new-build premium

Developer incentives should be disclosed to the mortgage lender because they may affect the valuation and mortgage offer.

Renting While Saving for a Deposit

Private renting remains the main alternative for people who cannot yet buy. High rents can make saving difficult because tenants must fund current housing costs while trying to build a deposit for a future home.

From 1 May 2026, major provisions of the Renters' Rights Act 2025 will change the private rented sector in England, including the tenancy regime and possession process.

Stronger tenant rights may improve security, but they do not by themselves reduce rents or make home ownership affordable.

Living with Parents for Longer

Many younger adults remain in the family home while saving. This can provide a practical route to a larger deposit. However, it may not be possible for every family.

Parents considering converting a garage, outbuilding or part of a home should check:

• Planning permission
• Building regulations
• Restrictions affecting listed buildings or conservation areas
• Mortgage and insurance conditions
• Council Tax implications
• Whether the accommodation creates a separate dwelling

An outbuilding cannot simply be converted into an independent home because there is enough room for a bed and a kettle.

Does Building More Homes Solve the Problem?

Increasing housing supply is an important part of improving affordability, but it is not the only issue.

New homes must also be:

• Built in areas where people need to live and work
• Supported by transport and public services
• Available at prices linked to local incomes
• Of an appropriate type and size
• Released onto the market rather than held back

Planning delays, land prices, infrastructure costs, construction capacity and developer incentives can all affect how quickly homes are built and what they cost.

Modular and Factory-Built Homes

Modern methods of construction allow substantial parts of a home to be manufactured in a factory and assembled on site.

This can reduce construction time, waste and some labour costs, but it does not remove the cost of:

• Land
• Planning permission
• Foundations and utilities
• Roads and infrastructure
• Finance
• Professional fees

Factory construction can therefore improve efficiency without automatically producing a genuinely affordable home.

Should You Buy as Soon as You Can?

Home ownership is not automatically the correct decision for everyone.

A buyer should consider:

• Whether their employment and income are stable
• Whether they expect to remain in the area
• The likely monthly mortgage and ownership costs
• Whether they have emergency savings
• The condition of the property
• The risk of interest-rate changes
• The possibility that property values may fall

Buying with the smallest possible deposit and no remaining savings may leave the buyer vulnerable to repairs, redundancy or higher mortgage payments.

Steps for a First-Time Buyer

Before making an offer:

• Check your credit records
• Prepare a realistic monthly budget
• Calculate the deposit and buying costs
• Speak to an independent mortgage adviser
• Obtain an agreement in principle
• Check eligibility for first-time buyer schemes
• Choose an independent conveyancing solicitor
• Arrange an appropriate survey

Do not rely solely on an online mortgage calculator or assume that the maximum amount offered is necessarily affordable.

Speak to a Conveyancing Solicitor

A conveyancing solicitor can investigate the legal title, searches, lease terms, planning position and contract before you become legally committed to the purchase.

You should obtain advice early if you are:

• Buying through shared ownership or First Homes
• Receiving a gifted deposit
• Buying with a friend or unmarried partner
• Purchasing a leasehold property
• Using a family loan or guarantee
• Buying a new-build home

Disclaimer: Solicitors.com is not a firm of solicitors. Content on this site is provided for general information about buying property in England and is not legal, mortgage or financial advice. Different property taxes and schemes apply in Wales, Scotland and Northern Ireland. Eligibility requirements, mortgage products and government schemes can change. You should obtain advice from a regulated conveyancing solicitor, mortgage adviser or financial adviser before proceeding. Use of this site does not establish a solicitor-client relationship.

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