Those buying their first home borrowed an average of £132,400, suggesting they needed a £25k deposit.
What’s the latest?
First-time buyers are taking up to 10 years to save a deposit to get on to the property ladder.
Nearly one in four people said it took them between five and 10 years to scrape together the money they needed to buy their first home, while 69% saved for more than two years, according to consumer group Which?.
At the same time, 29% of those taking their first step on the property ladder said they needed contributions from their parents, and 8% received financial help from another family member.
Why is this happening?
Strong house price gains in recent years, combined with tougher affordability criteria, have led to first-time buyers putting down increasingly large deposits.
The latest figures from the Council of Mortgage Lenders (CML) show that those buying their first property borrowed an average of £132,400 or 84.3% of their home’s value, suggesting they needed a typical deposit of nearly £25,000.
But the average household income for first-time buyers was £40,2000 a year, showing the struggle some people may face in accumulating a six-figure sum while also meeting all of their regular outgoings, including rent.
David Blake, principal mortgage adviser at Which? Mortgage Advisers, said: “Our research reveals the real difficulty that first-time buyers have in saving enough money for a deposit.”
Above: three-bedroom house for sale in Hove
Who does it affect?
The high deposits required since the global financial crisis has led to a fall in first-time buyer numbers.
But the situation is improving, with 338,900 people taking their first step on the property ladder in 2016, while mortgage lending to this group hit its highest level since CML records began in 1974.
Unsurprisingly, the biggest increase was seen in areas with lower house prices, with first-time buyer numbers rising by 11% in Wales year-on-year, but in London they dropped by 5%.
Sounds interesting. What’s the background?
There are a number of government schemes to help first-time buyers get on to the property ladder.
These include the Help to Buy equity loan, under which the Government offers first-time buyers with a 5% deposit a 20% interest-free loan to make it up to 25%.
To help people save, the Government launched a Help to Buy ISA under which it will add £50 to every £200 saved up to a maximum of £3,000.
And the Lifetime ISA aimed at helping first-time buyers aged under 40 has been promised for launch this April.
There is some good news for first-time buyers once they do manage to buy their first home too.
Record low mortgage rates mean they spend just 17.5% of their income on mortgage interest and repayments each month – close to a historic low.
Top 3 takeaways
- First-time buyers are taking up to 10 years to save a deposit to get on to the property ladder.
- Nearly one in four people said it took them between five and 10 years to scrape together the money they needed to buy their first home, while 69% saved for more than two years.
- Three out of 10 first-time buyers said they needed contributions from their parents, and 8% received financial help from another family member.
You may also be interested in...
- Top 10 countries for buying your first home
- 5 of the most common questions first-time buyers ask mortgage brokers
- The Government's first-time buyer schemes explained
- What is a Lifetime ISA?