A Generation Z or older Millennial buyer who purchased their home in 2020 will be the first generation to see house prices fall in real terms during their first five years of ownership. This is according to our new research, which delves into the very different experiences of various generations when it comes to property ownership.
Someone who bought their first property in 2020 will have seen nominal price growth of 27% over the past five years. However, after inflation is factored in, this translates to a fall of 3% over their period of ownership – during which time they will have made total mortgage payments of £73,866 (adjusted to 2025 prices).
This contrasts starkly with the average member of the Silent Generation. If they bought their first home in 1968, they would have seen its value more than double in real terms (a rise of 106%) in their first five years of ownership, during which time they paid – in 2025 prices – a total of only £7,994 on their mortgage.
When adjusted to 2025 prices, Baby Boomer, Generation X and Millennial buyers all shelled out similar amounts in mortgage payments in the first half of their 30-year loan term. For instance, a Baby Boomer who bought their first home in 1979 paid a total of £93,943, while a Millennial buying in 2011 paid £117,509. However, both Baby Boomers and Gen Xers paid off about 60% of their mortgage in the first 15 years, whereas Millennials only paid off 39%.
Members of Gen Z, however, have it even worse, paying significantly more throughout the 30-year mortgage term because they have been exposed both to high house prices and high interest rates. The average Gen Z buyer will pay £191,029 in the first half of their 30-year mortgage. This is £97,000 – or 103% – more than the average Baby Boomer, who paid the equivalent of £93,943 during the first 15 years of their loan in today’s prices. In the second half of their mortgage, a Gen Z owner will pay the equivalent of £208,118.
While Millennials benefitted from low interest rates when they first bought their home, the shift towards higher interest rates in recent years means they face paying significantly more in the second half of their mortgage term than previous generations – the total outlay of £185,642 (in today’s prices) is well over double what Baby Boomers and Gen Xers paid.
The shift to higher interest rates also means that a larger chunk of a first-time buyer's mortgage repayment in the early years goes towards paying the interest, which slows the rate at which they accrue capital in their home. For example, the average late Millennial or Gen Z buyer who purchased in 2020 will have seen 58% of their house price growth over the last five years go towards their mortgage interest. By contrast, this figure is 31% for a typical earlier Millennial who bought in 2011 and benefited from years of low mortgage rates.
In the short term, this has meant the end of using the rising value of a home as a cash machine to pay for cars, holidays, or indeed home improvements, particularly in the early years after a purchase when savings are most strained. This contrasts with previous generations of households, who – especially before the 2008 financial crisis – were able to borrow more than 100% of their property’s value. Overall, the loss of this ability is likely to put downward pressure on economic growth.
In the longer term, it seems likely that falling house prices, whether in absolute or real terms, will mean new buyers stay put for much longer.
There are a couple of reasons for this. First, there is the issue of “sunk costs” – in other words, people want to at least get their money back when they sell, even if the value of the home they are moving to has fallen too. Previous analysis we’ve done suggests that, if buyers are unable to recoup what they paid when they sell, they’re much less likely to move.
And, second, any price falls come out of the deposit and the equity that an owner has subsequently accrued in their property, if they have indeed managed to accrue any. So, if someone bought without a deposit, or with a small deposit of only 5% or 10%, and the value of their home falls, the value of their deposit diminishes or disappears completely. This makes it very difficult to move up the ladder and purchase a more expensive property, even if the value of that property has decreased as well.
There is an argument that a house price growth target could form part of the Bank of England’s inflation target – an idea floated by the Labour Party back in 2019. The Bank would likely need to target a fairly low positive figure that is small enough to prevent house prices from accelerating beyond incomes, but is also high enough to ensure that temporary market conditions do not trap new homeowners.
