The recent announcement by Skipton Building Society that it will offer 0% deposit mortgages has been met with mixed reactions. Some have welcomed the move as a way to help first-time buyers onto the property ladder, while others have warned that it could lead to a new wave of risky lending.
The Real Problem: Cost of Housing and Saving Challenges
While 0% deposit mortgages may help some people to buy their first home, they are not a silver bullet for the Generation Rent problem. The real problem is that the cost of housing has far outpaced wages in recent years, making it increasingly difficult for young people to save for a deposit.
According to a recent report by the Resolution Foundation, the average house price in the UK is now 9.5 times the average annual salary. This means that a first-time buyer would need to save for over a decade just to get a deposit of 10%.
Even with a 0% deposit mortgage, monthly repayments would be unaffordable for many people. In the UK, the average mortgage repayment for a first-time buyer is now £700 per month, which is more than half of the average rent.
The Financial and Lifestyle Challenges
The problem is not just financial. Many young people struggle to commit to a mortgage because modern careers involve relocations, retraining, and unclear progression. Unexpected expenses can also disrupt finances and make it difficult to afford a mortgage.
Cashflow for this generation is much more unpredictable and irregular than ever before. Factors such as growing wage inequality, the rise of self-employment, and the increasing cost of living contribute to this unpredictability, making it difficult for young people to qualify for a mortgage.
The Growing Trend: A Lifetime of Renting
As a result of high housing costs and restrictive mortgage rules, many young people are forced to rent instead of buying. This trend is likely to continue despite the fact that nearly 70% of young people consider home ownership as their primary financial goal.
Living a lifetime of renting not only poses financial burdens but also limits control over housing situations and stability in their lives.
Governments have been reluctant to intervene in the housing market, for fear that boosting the construction of new homes or subsidising homeownership for larger chunks of the population will lead to a fall in property prices, pushing hundreds of thousand mortgage owners into negative equity. As a result, governments have mostly introduced minor, temporary measures like Stamp duty discounts, which fail to effectively address the underlying problem.
A Solution: Tokenized Rent-to-Buy
Tokenized rent-to-buy is a model of property ownership that could help solve the Generation Rent problem. Under this model, tenants can buy a share in a property and have the option to purchase the remaining shares over time.
This model offers tenants more flexibility and control over their housing situation, as they are not tied to a mortgage and can easily relocate if their circumstances change.
Tokenized rent-to-buy is also more affordable than a traditional mortgage, as tenants only pay for the share of the property they own without worrying about loan interest.
The Key: Upfront Information and Enhanced Liquidity
The key to tokenized rent-to-buy is upfront information. Tenants need to know the property’s value and the required savings to buy a share. Similarly, property investors require upfront information to have an up-to-date view of their investments, similar to the stock market.
By accessing current data on properties, investors can make informed decisions and enhance liquidity in the real estate market.
A Promising Future
While tokenized rent-to-buy remains largely unavailable outside a few experimental schemes, progress is being made in both technology and legislation to bring this model of property ownership to the masses. The first step on this path is upfront information, and Conveyo is at the forefront of democratising access to this crucial data.
Conveyo offers a comprehensive platform that empowers investors and individuals in making informed decisions by accessing real-time information on properties. By utilising upfront information, you can enhance your investment strategies and navigate the real estate market with confidence.
Take the next step towards a more flexible and affordable approach to homeownership. Get in touch with Conveyo today and start utiliing upfront information for your investments and home sales. Together, we can shape the future of real estate.