First-time buyers show growing appetite for ‘forever homes’ – London Wallet

New research reveals increasing popularity of semi-detached properties, as first-time buyers report a greater appetite for ‘forever homes’.

Thinking about their costs in the near term however, buyers are opting for higher-duration mortgages to reduce their monthly payments, according to proprietary mortgage data from Barclays Property Insights.

Meanwhile, confidence in the housing market rebounded slightly to 29% in August, following July’s six-month low of 26%.

Barclays mortgage data shows that three-bedroom homes are the most popular choice for properties, making up 46% of all purchases in August. Millennial homeowners, age 28 to 43, are the most likely age-group to prioritise extra space – over a fifth (22%) say they bought a property with more bedrooms than they currently need, to avoid upsizing later. This compares to just 13 per cent across all ages.

First-time buyers are increasingly turning to houses, with semi-detached properties making up over a third (33.5%) of August’s first-time purchases, up 1.7% year-on-year. Meanwhile flats declined in popularity by 2.7%, accounting for a fifth (19.6%) of first-time buyer homes.

A third (33%) of recent Gen Z buyers, aged 18 to 27, said they bought a ‘forever home’ so that they wouldn’t have to move. Similarly, nearly three in 10 (27%) of all recent buyers said they intend to stay in their new home for at least 10 years.

When choosing a property, certain features are more highly sought after by those in different life stages. Nearly half (49%) of Gen X, aged 44 to 59, and 40 per cent of Millennial homeowners said they prioritised having a garden or outdoor space. Comparatively, only a third (32%) of Gen Z felt the same. Meanwhile, Gen Z were much more likely to want a dedicated work from home space (28%) compared to 20% of Millennials and just 9% of Gen X.

Borrowers opt for longer mortgage terms to keep costs down

Barclays data shows an increase in popularity of 30+ year mortgage terms. Among first-time buyers, these account for 41.3% of purchases, as they are typically younger and so have longer to pay back a mortgage.

When asked about their preferences, nearly four in 10 (37%) mortgage holders feel 30-40-year terms are more desirable than shorter durations because they could mean lower monthly repayments. This comes as four in 10 homeowners (41%) believe their mortgage payments take up too much of their monthly income. On average, homeowners report their mortgage accounts for 27.7% of their take-home pay, up from 26.6% in July.

However, over half of those with a mortgage (53%) are wary of extending their loan duration, as it would make them feel financially vulnerable later in life, with Millennials, feeling this most strongly at 60%.

Confidence rebounds, but cost concerns linger

Mortgage and rent spending grew 4.4% year-on-year in August, down from 5.2% in July, following the Bank of England’s base rate reduction. Though confidence in the housing market tipped back up slightly to 29%, monthly outgoings remain front of mind, with 60% concerned about rising mortgage and rental costs.

Encouragingly, a fifth (22%) of renters believe homeownership is achievable within five years, up from 16% last month and the highest level since February. However, amidst reports of record high house prices, nearly half (47%) cite this as a major barrier to ownership, up from 38% in July.

Meanwhile, three-fifths (61%) of renters have seen or expect to see their housing costs increase this year, squeezing their ability to save. To manage expenses, 40% are reviewing their budgets, 43% are cutting back on small luxuries, and 27% are reducing holiday spending.

Jatin Patel, head of mortgages, savings and insurance at Barclays, said: “Our data shows that first-time buyers are not considering property merely to get a ‘foot on the ladder’ but for the long term. Whether it’s to create space for a growing family, or to invest for the future, it’s encouraging to see young people feel slightly more confident in taking this significant step.

“It’s clear that buyers are still cost-conscious as 30-plus year mortgage terms become more popular – this option helps consumers reduce their payments by stretching their borrowing over a longer period of time.”

Julien Lafargue, chief market strategist at Barclays Private Bank and Wealth Management, added: “Despite facing challenges, the UK economy continues to demonstrate resilience. Our data shows that a period of caution is emerging, with over half of businesses delaying investment decisions until after the Autumn Budget, and consumers are also taking a ‘wait and see’ approach as they anticipate any changes that may lie ahead.

“However, looking beyond the immediate horizon, the combination of economic factors such as moderating inflation, and a more accommodative stance from the Bank of England should provide a supportive backdrop for the housing market. These considerations may help sustain demand and improve affordability, even as broader economic uncertainty lingers.”