There has been a sharp rise in first-time buyers aged 50 and over, according to analysis from mortgage broker Tembo.
The Financial Conduct Authority’s Product Sales Data indicates that the number of younger first-time buyers, particularly those aged under 30, is in decline while the number of older first time buyers aged over 40 has been growing by over 7% each year since 2018.
The overall number of first time buyers has grown by around 1% on average each year since 2018, with 360,000 in total in 2022. However, it is taking longer than ever to save sufficient funds for a housing deposit and for first-time buyers to have sufficient income to afford to buy a home.
The analysis found there is a significant regional variation in the proportion of first time buyers aged over 50 in the UK.
London has the lowest proportion, with 2.4% of first-time buyers aged over 50. The South West has the highest proportion, with 3.5% first-time buyers aged over 50 – 44% more than in London.
Although London currently has the lowest proportion of over 50s first time buyers, it is the fastest growing region. Total first-time buyer purchases increased by 22% from 2018 to 2022 but over 50’s grew by 64% over the same period in London.
In Scotland and the West Midlands, total first-time buyer numbers have declined from 2018 to 2022. However, despite this overall decline the number of first-time buyers over the age of 51 has sharply increased in these regions – 8% in Scotland and 22% in the West Midlands. In every region across the UK, growth in over 50s first-time buyers has outstripped total first-time buyer growth.
Based on these recent growth trends, Tembo has developed a projection for first-time buyers by age in 2030.
Assuming total first-time buyer numbers remain broadly flat at the five year annual average total of 360,000, by 2030 there will be 89,000 first-time buyers aged over 40. This equates to one in four of all first time buyers.
For first-time buyers aged over 50, it is forecast that the number will increase from 12,000 in 2022 to 19,000 by 2030, equating to 5% of total first time buyers.
According to Tembo, there are four key drivers which have led to an increasing number of people buying their first home later in life.
Saving for a deposit is taking longer. While there are a number of deals for those with no deposit – the options and value significantly increase for those with a larger deposit. On average a Tembo customer has a deposit of £74,000 equating to 26% of the value of the home they are purchasing. If a buyer was to save £150 per month in a Lifetime Isa Savings account it would take them an estimated 22 years to reach this amount. With headwinds from cost of living and above inflation rent increases, the ability to save has been reducing, meaning the time taken to save for a sufficient deposit is increasing.
The housing affordability crisis in the UK has increased with the 2022 income to house price affordability now 8.3x in England, compared to 6.7x 10 years ago. This means that many people are unable to afford a home on their current income. In order to be able to afford a home, people are having to wait for their income to increase. For many people that occurs as they progress and increase in seniority in their jobs.
Support from either a buying scheme such as Help to Buy or shared ownership or from family or friends. It has been estimated that half of first-time buyer transactions last year were supported by family. The average age of receiving an inheritance from a parent in the UK is 61. While some are fortunate to be given funds while their parents are still alive, for many that is not possible.
An increasing number of mortgages that run into retirement. The FCA launched Retirement Interest Only mortgages in 2018, enabling consumers to find an alternative way to borrow into retirement. There are a growing number of mortgages that run well into retirement – either with no upper age limit or in some cases up to the age of 90. This has meant that becoming a homeowner, with a mortgage, in your sixties is now entirely possible.
Richard Dana, founder and CEO at Tembo, said: “A perfect storm of factors impacting first time buyer affordability means we’re now seeing a sharp rise in the number of people waiting until they’re aged 50 or over before they buy their first home.
“This is presenting a challenge to both the financial services industry and would-be home buyers, with many traditional high-street lenders not offering extended mortgage loan terms beyond the age of 75.”