Cost of buying first home in London more than doubles over last half century
Today’s first-time-buyers in London have to pay two and a half times as much for their first home as they did five decades ago, according to new research.
A report published by the Resolution Foundation today shows the cost of purchasing a first home with a mortgage in the capital was £212,000 in 1974 – today, it is over £500,000.
The surge in the cost of getting on to the housing ladder in London is significantly higher than the 67 per cent rise from £154,000 to £254,000 for the UK as a whole over the same period.
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The report, entitled Stakes and Ladders, which was funded by the Nuffield Foundation, found that millennials face the highest lifetime costs of funding their first-time home purchases.
The costs of buying a typical first-time property with a mortgage has risen by two-thirds over the past half-century, with those born in the late 1980s shouldering the highest costs of all.
Record rises in UK house prices have partly offset financial benefits today’s millennials have gained from historically low interest rates. Prospective homeowners now require a £33,000 deposit to get onto the property ladder. This has tripled in real terms over the past 20 years, rising from £11,000 in 2000.
Tighter lending conditions have also made it tougher for millennials to secure funding to finance home purchases, the report notes.
Lindsay Judge, research director at the Resolution Foundation, says: “Millennials have got the rawest deal of any generation.”
“The UK property market has long been a source of intergenerational strife. Baby boomers lament the 10 per cent-plus interest rates when they first bought, while record house prices have pulled the property ladder away completely from many millennials.”
Baby boomers face higher interest costs
Older generations buying their first property did face higher mortgage servicing costs in the early years of home ownership compared today’s crop of FTBs.
Baby boomers paid £31,000 of interest in the first five years of homeownership if they purchased their first property in 1974, compared to £17,000 on a typical purchase today.
However, a family headed by someone born in 2002 with typical family income levels would have to wait until their 36th birthday to build up enough money for a deposit.
Those born in the 1970s would be able put down a deposit on their first home by the age of 22.
Alex Beer, welfare programme head at the Nuffield Foundation, says: “With the lifetime costs associated with first-time home ownership higher for millennials than any previous generation, policymakers should consider actions they might take to help level the playing field.”
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