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First-time buyer deposits soar more than 50% in a decade

The average person taking their first step on to the property ladder now puts down more than £45,000 as a deposit.

Guest Author
Words by: Nicky Burridge

Contributing Editor

The average deposit put down by a first-time buyer has soared by more than 50% during the past decade.

The typical person taking their first step on to the property ladder now puts down an average of £45,569, according to professional services platform Stipendium.

The sum represents a 54% jump compared with first-time buyer deposits 10 years ago, and a 40% increase in the past five years alone.

Not only have house prices risen during the period, but the typical deposit first-time buyers need to have saved in order to secure a mortgage has also increased from 17% of their home’s value to 20%.

While the combination of soaring house prices and larger deposits makes it harder for first-time buyers to get on to the property ladder, the government has launched a number of schemes during the past 10 years to help people purchase their first home.

Why is this happening?

The huge jump in the size of deposits first-time buyers are putting down has been largely driven by increases to house prices.

The research found that while 10 years ago the typical person put down a 17% deposit, the average first-time buyer property cost just £138,973, giving a deposit of £23,625, or £29,684 in today’s money after being adjusted for inflation.

But fast-forward 10 years, and the typical first-time buyer property now costs £227,846.

At the same time, the proportion of a home’s value that first-time buyers need to put down in order to qualify for a mortgage has increased from 17% to 20%.

As a result, first-time buyers now need to save an average of £45,569 – a massive £21,944 more than 10 years ago.

Who does it affect?

The strong house price growth seen during the past decade makes it particularly challenging for first-time buyers to get on to the property ladder in areas where house prices are higher.

This is particularly the case for first-time buyers in London, where the average property costs £508,500 according to our latest House Price Index, as well as other towns and cities in the South East, where property prices are generally higher.

But there are still pockets of affordability for first-time buyers, particularly in northern cities, such as Glasgow, Newcastle, Aberdeen and Sheffield.

The average home in Glasgow costs just £135,200, meaning a first time buyer putting down a 20% deposit would need to save £27,040 – broadly in line with the typical deposit put down 10 years ago.

What’s the background?

The good news for first-time buyers is that the government has introduced a number of schemes to help them get on to the property ladder.

People saving for a deposit can benefit from the Lifetime ISA, under which they can save £4,000 a year to which the government adds a 25% bonus, up to a maximum of £1,000 annually.

The money must be used to either purchase a first home or for retirement.

To help buyers purchase a property with a smaller deposit, there is the 95% mortgage guarantee scheme.

The Help to Buy equity loan scheme also enables first-time buyers to purchase a new-build property with a 5% deposit, which the government tops up with a 20% equity loan that's interest-free for five years.

Other schemes include First Homes, under which first-time buyers, key workers and local people can purchase a home at a 30% discount to its market price, and Shared Ownership, which enables people to buy a share in a property and pay rent on the portion they don’t own.

First-time buyers are also exempt from stamp duty on the first £300,000 of a home purchase on properties costing up to £500,000.

Find out more about the stamp duty break for first-time buyers

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