As predicted, the number of mortgages increased in April as would-be buyers rushed to take advantage of the Stamp Duty Extension.

Figures from the Bank of England’s latest quarterly report show that mortgage approvals increased to 86,900 (from 83,400 in March) – that’s the first monthly increase in five months. In November 2020 lenders approved a huge 103,000 mortgages as buyers rushed to beat the original March deadline for the Stamp Duty Holiday. The current extension is due to end on 30 June when the tax-free sum will fall to £250,000.

The April mortgage figures are around 20,000 approvals higher than the pre-pandemic period in March and April 2020. Nothing is expected to change until the end of the year at least thanks to the better-than-expected economic recovery for the UK, together with continued low interest rates.

Average mortgage 12.3% higher

In terms of value, the average mortgage approval in April this year was for £232,400, which is a 12.3% increase on last April’s figure of £206,900. The Bank of England also reported that households continued to pay off overdrafts and credit card debt – although to a lesser degree than before, now that lockdown is easing and restaurants and shops reopening.

Homeowners are propelling the market

Data also shows that, for the first time, it’s people with equity who are propelling the market. There were 82% more second- and third-time buyers this time round than in the previous quarter in 2020. The mortgage completion figure for first-time buyers has risen by 31% over the same period. Banking industry group UK Finance said this reversed the pattern of the past decade which saw more first-time buyers with mortgage approvals.

The impetus has been the desire for property with more space and gardens – something that second- and third-time buyers could afford, thanks to the growth in value of their existing properties.

“The ongoing health crisis has brought with it a need for space during lockdowns which existing homeowners, supported by over a decade now of uninterrupted price growth increasing their housing equity stakes, have been well placed to respond to,” explained a spokesman for UK Finance.

South of England owners have most equity

The south of England – where house values have risen most in the UK over the past decade – had the highest number of home movers. In the southeast, the number of home-mover mortgages increased by 110% during the first quarter year-on-year. In East Anglia, the figure had increased by 91% and in London by 85%.

Around 60% of borrowers own at least half of their home, with 50% of homeowners in the southeast owning equity of £250,000. In London around 20% of homeowners have equity valued at in excess of £500,000.

Figures also show that homeowners have been intent on moving further afield too. This corresponds with the desire to move to bigger properties in greener areas. If the working-from-home trend continues, then property analysts believe there will be a “broadening out” of property values across the whole of the UK.

In the Budget at the beginning of March, Chancellor Rishi Sunak announced a new scheme to help first-time buyers get on the property ladder with just a 5% deposit along with a further extension to the Stamp Duty Holiday. This may be good news for some, but it doesn’t necessarily help and support everybody looking for somewhere new to live.

Home ownership continues to be the focus of UK government policy on the current housing crisis whereas the private rental market received very little support or attention other than the odd bit of new legislation. Changes in people’s lifestyles and the soaring costs of property are having an impact on how people view house buying and renting and it suggests home ownership might no longer be the only solution out there for everyone.

So, does the government’s housing policy support the population’s housing aspirations?

Priced out of government support

There are two key factors that should influence the UK’s housing policy: what can people afford and what suits their lifestyles. So, let’s look at the cost to begin with.

The government’s new 5% mortgage deposit scheme and Stamp Duty reduction is designed to help more people get on the property ladder. However, one of the biggest consequences of these policies is the increase in property prices, making the possibility of home ownership even more difficult. The deposit and transactional costs of buying a property are only one part of the financial process for securing a mortgage; the biggest hurdle is affordability.

Take Cambridge as an example. According to the latest Rightmove stats1, the average cost of a home in the city is £515,741 – meaning many properties in the area are priced out of first-time buyers’ reach, irrespective of any government help or support.

Average salary growth continues to be outpaced by the housing market, too. According to the ONS, the median weekly wage for full-time workers in the UK rose by just 0.1% from 2019 to 2020, standing at £31,461 a year. That’s almost a tenth of the UK’s average house price2. This figure also depends on other factors including age and location with, as expected, London wages pulling the average up.

In a year where outgoings would have been massively reduced for many by lockdowns, research shows that two thirds of people in the UK saved just over £7,0003 last year. Based on all these figures, a first-time buyer in an area like Cambridge is looking at 3½ years to save even a 5% deposit on a property at the average price for the area. This means that if you’re only just starting to save, you’re very unlikely to be able to take advantage of the scheme before it ends in December 2022.

So, affordability is just one reason why more people are looking for quality rental homes, but lifestyle changes are playing a big part, too.

A generation and a pandemic are changing aspirations

The expectations and choices of millennials and Generation Z, and the impact of the pandemic, are going to have a massive influence on lifestyle in the years and decades to come. Owning a home was once considered to be an aspiration that everyone should have, but now many people don’t see it that way.

The exploration of things like technology and a more conscious and curious generation are leading to people wanting more flexible lives. One study4 found that nearly half of millennials plan to leave their jobs within two years of starting them, while less than a third plan to stay longer than five years. Car ownership is also falling among younger generations too5, putting greater emphasis on easy access to public transport and local amenities.

And generations like millennials and Generation Z want to travel and explore and are more likely to fit in jobs around their travel plans, pushing back careers and home ownership to later in life.

People don’t want things that tie them down and a fixed address certainly falls into that category. The government’s support to get people on the property ladder is aimed at people more likely to be between the ages of 20 and 35 – so where is the support for the rental market which is likely to be suited to the lifestyle of many people of this generation?

The pandemic has also had its role to play. Some businesses have now committed to flexible working with the likes of Nationwide saying that employees can work from anywhere long-term. They are not alone in that stance and millennials and Generation Z are likely to spot an opportunity to mix the flexible lifestyle they want with a job they want. With remote working, people no longer have to live near their place of work – they can live well and with more choice and freedom as to where and how they want to live.

So, considering both the changes in lifestyle and the rising cost of getting on the property ladder, the government needs to consider more support for the rental market. Even though price is a huge factor in why younger people maybe aren’t buying homes, we may now have moved past the point of what the term ‘generation rent’ once stood for to a generation that wants to rent to support their flexible lifestyle. The property market therefore needs to meet this demand and ensure there are enough quality rental properties available in the right areas to meet the changing needs of the next generations. We need more support from the government to make this happen.

For more information on Wise Living, visit [w] wiselivinghomes.co.uk

1. [w] rightmove.co.uk/house-prices/cambridge
2. [w] ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/january2021
3. [w] yourmoney.com/saving-banking/two-thirds-of-brits-saved-7000-in-2020
4. [w] independent.co.uk/life-style/millennials-jobs-career-work-salary-quit-young-people-study-a8361936.html
5. [w] info.uwe.ac.uk/news/uwenews/news.aspx?id=3754