- A major new study by Santander1 shows more than four in ten (44%) first-time buyers (FTBs) delayed their plans to buy a home in 2020
- However, the homeownership dream remains strong with nearly two-thirds (63%) saying it is now more important than it was pre-pandemic
- The proportion of FTBs who say raising a deposit is the biggest barrier to homeownership has risen from 30% in 2019 to 52% in 20212
- Other challenges to buying include falling incomes, pressures on the Bank of Mum and Dad and house price rises across the country
- Santander outlines suggestions to support homebuyers, including help for key workers to get on the property ladder
A major new study by Santander – 'Life after lockdown: the future of UK homeownership (PDF - 15.50 MB)' – has concluded that the impact of the pandemic, both on the property market and the personal finances of those looking to buy, has exacerbated the existing gulf between struggling first-time buyers and those already on the property ladder.
The study, which analysed the opinions of 12,000 UK adults, found that while the pandemic made homeownership a bigger priority for nearly two-thirds (63%) of first-time buyers, more than four in ten (44%) delayed their plans to buy a home in 2020.
Financial pressures
Despite Bank of England reports3 that the pandemic has enabled many households to accumulate more savings, less than one in five (17%) first-time buyers said lockdown enabled them to save more money for a deposit, compared to 31% of all buyer types. This inequality comes as younger buyers more harshly felt the effects of furlough, unemployment and reduced income during COVID-19, while many continued to grapple with the cost of renting.
Nearly half (47%) of first-time buyers said they delayed their buying plans due to concerns about their personal finances.
Alongside this, over half (54%) believe that financial support for first-time buyers from the Bank of Mum and Dad will be less available post-pandemic. ONS figures show that redundancies among the over-50s almost tripled over the last 12 months4 contributing to financial pressures for parents who might previously have been able to support their children in raising a deposit. Estimates suggest that on average, the Bank of Mum and Dad provides more than £18,000 of financial support to a first-time buyer5.
As a result, over half (52%) say that raising a deposit is the biggest issue facing first-time buyers today, an increase on the 30% who identified this as the key barrier in Santander’s 2019 first-time buyer study.
Meanwhile, Santander's analysis found that while the stamp duty holiday introduced in June 2020 was clearly an incentive to homebuyers, just 22% of first-time buyers said they were encouraged by the holiday, compared to 46% of second home buyers and 44% of buy to let buyers.
Location, location, location
Almost half (47%) of first-time buyers say the pandemic has made traditionally more expensive, inner-city living less desirable while rural and coastal living has increased in popularity among all buyer types.
However, the result of this could be that regional house prices grow disproportionately quickly with the emergence of new ‘virtual commuter belts’ - areas increasing in popularity which would previously have been discounted as being too far from their place of work. Already house prices have grown almost twice as fast in Wales (11.0%) and the North-West of England (10.5%) as they did in London (5.7%)6 during 2020.
As a result, first-time buyers may find themselves priced out of a growing number of areas, with 33% saying that finding an affordable property in their preferred area is a barrier to ownership – three times the 11% who cited this as a barrier in 2019.
Over one in ten (13%) first-time buyers said they had delayed plans to move home while there was uncertainty on what their future remote working policy might be.
Tracie Pearce, Chief Customer Officer, Homes at Santander commented: “The impact of the pandemic on the housing market has been significant with many people reassessing what they want from their homes and making the most of a booming market and government support with stamp duty. However, many younger people looking to take their first step on the property ladder have seen their earnings and job prospects hit hard, impacting their dreams of homeownership.
“Our report highlights that it is now really important that industry and government reflect on the last year and work together to make defining changes to support a new generation of first-time buyers.”
Keeping the dream alive
In the last year, Santander continued to support the first-time buyer market through a number of measures including accepting the use of gifted deposits, up to four people on a mortgage application, mortgage terms of up to 40 years, help to buy mortgages and most recently by joining the Government’s 95% mortgage guarantee scheme.
The bank has also developed new resources for first time buyers, including a deposit calculator 7 to help work out how much they need to save to achieve their deposit goal. Santander’s 2019 first-time buyer study found that four in ten would-be first-time buyers were relying on financial help from their family, so Santander has also produced guidance for families or friends who want to support a first-time buyer8.
However, Santander’s report suggests that more needs to be done by both industry and government. Over half (59%) of UK adults say that the government should give first-time buyers more support in the wake of the pandemic to begin to address the growing chasm between them and existing homeowners.
Santander has developed a range of suggested measures that it believes will improve first-time buyers’ prospects:
Help for key workers: A government loan scheme enabling public sector key workers to borrow money towards a deposit;
Stamp Duty: Matching stamp duty thresholds to regional average house prices and a stamp duty incentive for over 55s looking to downsize;
Affordability: A review of the loan to income rules on borrowing, allowing greater flexibility to consider previous customer spending behaviours, such as rental payments; and
Commercial to residential: A commitment that commercial to residential conversion plans will include development of essential local amenities, ensuring a property holds its resale value.
-ENDS-
Notes to editors:
1. Life after lockdown: the future of UK homeownership (PDF - 15.50 MB) is comprised of industry analysis and two sets of field work undertaken from January to March 2021 – 2,000 UK adults who have either bought a property since March 2020 or plan to in the next 5 years and a nationally representative sample of 10,000 UK adults aged 18+.
2.
| Barriers to homeownership | 2019 | 2021 |
| Raising a deposit | 30% | 52% |
| Borrowing enough based on income | 15% | 37% |
| Finding an affordable property that suits needs | 10% | 36% |
| Finding an affordable property in my preferred area | 11% | 33% |
3. Bank of England, Money and Credit release.
4. ONS labour force survey, March 2021
5. Santander first-time buyer research, among 2,000 first-time buyers. Conducted April 2021.
6. Regional House Price Increases – ONS House price index – Feb 2021
| Region | Average House price in Jan-20 | Average House Price in Jan-21 | % Change |
| Wales | £163,205 | £181,198 | 11.0% |
| North West | £164,563 | £181,902 | 10.5% |
| North East | £127,346 | £140,606 | 10.4% |
| Yorkshire and The Humber | £164,553 | £181,057 | 10.0% |
| East Midlands | £195,100 | £212,354 | 8.8% |
| South West | £257,494 | £279,147 | 8.4% |
| East | £288,877 | £309,243 | 7.1% |
| Scotland | £153,518 | £164,263 | 7.0% |
| South East | £321,704 | £342,099 | 6.3% |
| West Midlands | £201,060 | £213,678 | 6.3% |
| London | £475,948 | £503,308 | 5.7% |
| Northern Ireland | £140,722 | £147,593 | 4.9% |
7. https://www.santander.co.uk/personal/mortgages/mortgage-calculators/home-deposit-calculator
8. https://www.santander.co.uk/personal/mortgages/step-up
Santander UK is a financial services provider in the UK that offers a wide range of personal and commercial financial products and services. At 31 December 2020, the bank had around 21,900 employees and serves around 14 million active customers, via a nationwide branch network, telephone, mobile and online banking. Santander UK is subject to the full supervision of the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) in the UK. Santander UK plc customers’ eligible deposits are protected by the Financial Services Compensation Scheme (FSCS) in the UK.
Banco Santander (SAN SM, STD US, BNC LN) is a leading retail and commercial bank, founded in 1857 and headquartered in Spain. It has a meaningful presence in 10 core markets in Europe and the Americas, and is one of the largest banks in the world by market capitalization. Its purpose is to help people and businesses prosper in a simple, personal and fair way. Santander is building a more responsible bank and has made a number of commitments to support this objective, including raising over €120 billion in green financing between 2019 and 2025, as well as financially empowering more than 10 million people over the same period. At the end of 2020, Banco Santander had more than a trillion euros in total funds, 148 million customers, of which 22.8 million are loyal and 42.4 million are digital, 11,000 branches and 191,000 employees.