Next generation: first-time buyer deposits could be set to leap by nearly 60% over the next 10 years, says research from mortgage broker, London & Country.
What’s the latest?
First-time buyers will need a deposit of more than £80,000 to get on to the property ladder by 2027.
The average amount put down by people buying their first home is expected to soar from £51,821 today to £81,468 in a decade's time, according to calculations by L&C Mortgages.
But buyers in London are expected to be worst affected, with the amount they need to save jumping by 75% to a massive £244,842.
David Hollingworth, of L&C Mortgages, said: “Pulling together a deposit continues to represent one of the single biggest challenges and these forecasts will make frightening reading for aspiring first-time buyers.
Why is this happening?
The main factor driving the predicted 60% increase in the average deposit is rising house prices.
But as property prices increase, the proportion of a home' value required as a deposit will also be raised to keep mortgage payments affordable, said L&C.
In this case the broker estimates that, by 2027, first-time buyers will need deposits equivalent to 28% of the value of the home they are buying.
Do you qualify for the Chancellor's first-time buyers' stamp duty break? Check out our Q&A
Who does it affect?
First-time buyers in London will suffer the biggest financial blow with deposits in the next 10 years rising by 75% to a whacking £244,842, says L&C (see table below).
They are followed by those trying to get on to the property ladder in Brighton and Hove who will face a 62% jump to £125,280, while those in Bristol will need £92,062, which is 59% more than they must raise now.
Deposits are expected to go up by at least 40% in all of the 17 cities the group looked at.
Sounds interesting. What’s the background?
There is a significant shortfall between the average deposit first-time buyers think they will need and the typical sum put down.
L&C found that people hoping to obtain their first home in the coming 10 years estimated they would need £35,402 – significantly below the current figure of £51,821. Worse still, they'd only actually managed save an average £16,436 to date.
Overall, potential buyers estimate it will take them three years and eight months to save the full amount they need, although 24% of people admitted they had not yet saved anything.
But around 11% of the total is likely to be contributed by parents or other family members, while 6% will come from an inheritance.
Source: L&C Mortgages Research (compiled by Opinium)
Top 3 takeaways
- In 10 years' time, first-time buyers will need average deposits of £80,000
- Average deposit is set to soar from £51,821 to £81,468
- London deposits are expected to jump by 75% to a massive £244,842
You might also be interested in...
- Mixed reaction to first-time buyer stamp duty break
- First-time buyers face £15,000 shortfall when buying a home
- Millennials choose adventurous travel over buying a home