Fergus Cumming and John Lewis
Over the last 15 years house prices have increased and home-ownership rates have fallen. But while the *number* of first-time buyers (FTBs) has fallen – what happened to the average *age* of FTBs? Not very much…
Using data on every UK mortgage from the FCA’s Product Sales Database, we pick out the ages of FTBs:
The fall from 2006 (red) to 2008 (purple) is very closely approximated by just halving the number of buyers at each age (grey dotted). Though FTB mortgage issuance fell sharply, the shape of the distribution was essentially unchanged. When it recovered from 2008 (purple) to 2018 (blue), the percentage rise in FTB transactions was similar for most age groups. So the age distribution of FTBs has moved much more up-and-down than side-to-side.
The chart below shows key percentiles, plus the median and mean ages of FTBs:
The age distribution of FTBs has only shifted very slightly rightwards over time. The mean and median age are only about 12 and 16 months older respectively in 2018 than in 2006.
This can still be reconciled with declining home-ownership rates amongst the young because the absolute numbers are bigger. Halving the flow of 20,000 30-year old FTBs in 2006 means 10,000 fewer FTBs annually. But an equivalent halving of the 2,000-odd 50-year old FTBs means a fall of only 1,000.
And these effects cumulate over time. Most 50-somethings already bought homes before 2008 so their cohort’s home-ownership rate was barely affected. But most 20-somethings hadn’t, and so their cohort was harder hit.
Fergus Cumming works in the Bank’s Monetary Policy Outlook Division and John Lewis works in the Bank’s Research Hub.
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Changes to age composition of UK population is also relevant to the home ownership picture here. ONS figures tell us that there were a million more people aged 25-34 in 2018 compared with 2006.
This is really interesting. What might have happened is that people managed to get into home ownership, but it could have taken them longer to achieve this. What the data seems to imply is that fewer people at all ages are making it into home ownership. We might have thought that with a later state pension age, people could be getting mortgage offers later in life. Apparently not. If someone has not made the switch by the time they’re (say) about 40, it’s probably not going to happen. Potentially massive implications for the future shape of the housing market in the UK.