24 January 2025
If you are covering Nationwide’s Housing Affordability Report, please see the following comment from Karen Noye, mortgage expert at Quilter:
"The Nationwide Housing Affordability Report highlights the immense pressure many prospective buyers face in trying to get on the property ladder. Despite modest improvements in affordability over the past year, housing remains prohibitively expensive for many, with the average first-time buyer still needing to dedicate 36% of their take-home pay to a mortgage. The long-run average of 30% feels like a distant memory for today’s buyers, particularly in the South of England and London, where house price-to-earnings ratios remain at record highs.
"The strain is particularly evident in the increasing reliance on longer mortgage terms. Recent FCA data we obtained from a freedom of information request revealed a significant rise in people aged over 36 taking out mortgages with terms of 35 years or more. In the first nine months of 2024 alone, over 22,000 such loans were sold. This trend represents a 156% increase since 2019 and shows how affordability pressures are pushing borrowers into commitments that extend well into their 70s. While longer terms can reduce monthly repayments, they lead to dramatically higher total borrowing costs and delay financial independence.
"For many, this situation is further exacerbated by record rental costs and the ongoing cost-of-living crisis, which have hampered the ability to save for a deposit in the first place. Even with the resilience seen in the housing market and surprising levels of first-time buyer activity, the reality is that affordability constraints are creating significant long-term risks for individuals’ financial security.
"What we are now likely to see is a generation of retirees who are either encumbered with mortgage debt well into retirement, as a result of having to take out lengthy terms to make monthly costs manageable, or a huge swathe of people who have simply been unable to get onto the housing ladder at all and are still renting. This dual challenge is hugely damaging for retirement prospects. Retirees on fixed incomes will face the burden of managing mortgage repayments alongside other living costs, while those who remain renters will grapple with escalating rental payments that erode their savings and leave little room for a secure and comfortable retirement.
"Financial planners are now at the forefront of helping clients navigate these challenges, whether by structuring longer-term loans or assisting with broader financial planning to mitigate the retirement risks of extended mortgage terms or prolonged renting. The challenge is ensuring that the decisions made today do not jeopardise financial stability in the future. This generation’s housing affordability crisis threatens to create a profound legacy of financial insecurity."
