2023 could shatter the wafer-thin finances of young homeowners

In November, the average home cost £294,910. That’s up £27,540 in a year, £70,457 in five years, and £125,683 in ten years. The average house price has more than doubled in that time.

Someone buying a decade ago with a 10% deposit would have needed £12,568 – that’s £16,923 less than they’d need today.

Millennial and Gen Z homeowners are much less likely than their older homeowning counterparts to have enough savings or surplus income – and less likely to score ‘good’ or ‘great’ for their overall financial resilience – according to the HL Savings & Resilience Barometer.

Sarah Coles, senior personal finance analyst, Hargreaves Lansdown said: “The gargantuan leap to get onto the property ladder has stretched younger people’s finances wafer-thin. The triple threat of expensive bills, rising mortgage rates and falling house prices could shatter them.

“The average first time buyer is 32, so Generation Z will have had to have beaten the odds to be homeowners by now. Meanwhile, even the most geriatric Millennial homeowner is likely to have bought within the past decade. There’s every chance they focused so hard on buying their first home that they’ve neglected other areas of their finances – and left themselves vulnerable if their circumstances change. They may also have stretched their budgets incredibly thin in order to buy, so if 2023 brings more inflation, an expensive remortgage and a property downturn, it could be devastating.


“House prices have been climbing ever since they hit a low in the aftermath of the global financial crisis, in 2009. However, in the years since the onset of the pandemic, they have rocketed – gaining more than 10% in the past year, and 27% in three years. A huge proportion of those who bought more recently will have had to focus all their energies on building a deposit, and there’s a real risk other areas of their finances will have suffered.

“The HL Savings & Resilience Barometer shows that overall homeowners tend to have better financial resilience than renters. This owes much to the expense of renting, but also to the fact that younger homeowners tend to be higher earners than their rent-paying counterparts. However, given that they earn more, there are some notable weaknesses in their finances.

“Those in Gen Z have faced the biggest buying challenge, and as a result, are less likely to have enough emergency savings (at least three months’ worth of essential expenses). On average, just under two thirds of all people have enough emergency savings (65%). However, among Gen Z homeowners this drops to around a half (53%). They’re also less than half as likely to have enough money left over at the end of the month to be considered resilient. The national average is 32%, whereas for Gen Z homeowners it’s 13%.

“Millennials fare better, but in every case are less likely to be financially resilient than homeowners in Gen X – many of whom bought when property was far more affordable. 63% of Millennial homeowners score ‘good’ or ‘great’ for their overall financial resilience – compared to 70% of Gen X property owners.

The risks

“Younger homeowners are also more exposed to the risks that 2023 may hold in store. By stretching further in order to get onto the property ladder, it leaves less wiggle room in their budget to cover rising costs. We know energy prices are set to rise again in April and that food price inflation is here to stay, and it’s hard to cut back on either in order to pay the mortgage.

“These owners are particularly exposed if they have to remortgage. Overall, those who have to remortgage this year will see their savings and debt resilience scores drop by around 3 percentage points. However, those who are refinancing big mortgages will suffer particularly badly.

“Younger people also face bigger risks if prices fall. The Barometer bases its forecasts on house prices dropping 10.4% from the peak by the end of 2023. It has also modelled the impact of an 18% drop. With a bigger fall in house prices, homeowners would see their average retirement resilience score drop seven times more than for renters. The fall in scores for Gen Z and Millennials was three times larger than for older people.

Better than the alternative

“However, while younger homeowners face real risks, it’s nothing compared to those their renting counterparts are wrestling with. Within every age group, renters are less resilient, so that only 23% of renters in Gen Z score ‘good’ or great’ for their overall resilience, along with 26% of Millennial renters and  21% of those renting in Gen X.”