Businessman climbing on wooden ladder to reach cloud houseUnfortunately that is not the question for many young (and even not so young) aspiring UK homeowners who are struggling to get their feet on the property ladder and buy their own home in the current market.

It seems that the UK as a nation is obsessed with home ownership and that first rung on the property ladder symbolises stability, success and achievement (with the small matter of a 25 year mortgage). However, across the country home ownership has seen a sharp decline with the data from the government’s English House Survey showing that the total number of first time buyers has significantly fallen in the last 10 years, because that first rung on the ladder is out of reach for many people. The Resolution Foundation have estimated that English home ownership now sits at just 63.8% – taking home ownership back to levels last seen in 1986.

The decline in home ownership has arrived hand in hand with the rise of the private rental market. The on-going boom in the buy to let market has supported the buoyancy in the house price market which makes it that much harder for aspiring first time buyers.

Following the crash in 2008, when many lenders provided 100% mortgages, the size of the deposit required by a buyer has significantly increased with many lenders requiring deposits of 20% of a property’s value. In a recent study, The Resolution Foundation identified that where people rent this ‘accounts for 30% of net household income compared with 23% associated with mortgages’. Therefore, as rents are exceeding what the same household could expect to pay in mortgage payments, it’s no wonder that many aspiring first time buyers cannot afford to escape this Catch 22 and save for a deposit whilst continuing to pay their rent.

It is not just the price of housing itself that is the problem, but the cost of housing relative to income. With a continuing trend of house price inflation outstripping wage inflation, this affects buyers’ ability to save that all-essential deposit and actually borrow enough by way of mortgage to buy their first home.

Post the Brexit vote, there is much speculation in the market that house prices will drop and at first glance this, together with the recent drop in interest rates, could open up the market for the first time buyer. However, as clearly put by the Resolution Foundation, ‘cheaper houses are of no benefit to people who have less than ever to spend’ and ‘we cannot rely on the (uncertain) house price effect of Brexit to solve the endemic housing affordability problem we have in the UK’.

It seems that those who do manage to buy are increasingly reliant on the good old ‘Bank of Mum and Dad’. Analysis and research by Legal and General Group and the Centre for Economics & Business Research has estimated that homebuyers will receive £5 billion of help from families and friends this year making the ‘Bank of Mum and Dad’ the equivalent of the 10th biggest mortgage lender in the country (and likely the most popular, with no doubt zero interest rates, infinite repayment terms and no guaranteed commitments). And if not fortunate (or favoured!) enough to get credit approval from the Bank of Mum and Dad, it seems that the government’s Help to Buy Schemes are not always the answer as in many areas of the country the average price of a starter home can exceed the maximum purchase price cap on Help to Buy.

But is home ownership the be all and end all?  For an economy where consumer confidence and stability is key, it may not be the lynchpin but it is a very important factor. The shift towards private renting could mean that the younger generation cannot in effect put down ‘roots’, perhaps contributing to the dawn of a new culture and less stable lifestyle. The lack of both consumer confidence and stability in a difficult housing market, particularly within the younger generation, could mean that people are waiting longer and longer to get themselves onto the property ladder, if at all, which could in turn effect savings, financial security and pensions in the long term for that generation. The knock-on effect on the economy is uncertain, to say the least.