Thanks to rising property prices and wages that have failed to follow a similar trend, it’s no secret that the present generation of first time buyers have faced much greater difficulties getting onto the proper ladder than many of those that came before.
However, with new data showing that first time buyers are purchasing homes with an average deposit almost £4,000 lower than in the previous financial year, many are wondering if things are improving for first time buyers.
How has the average first time buyer deposit changed?
The annual English Housing Survey revealed that the typical deposit paid by a first-time buyer in 2017/18 was £44,635, down from £48,591 the year before. This shows a fall of £3,953 or 8.14%.
According to the research, first time buyers were also able to get onto the property ladder slightly sooner in 2017/18 than they could in the previous year, with the average first time buyer purchasing their first home at the age of 32.6 compared to 33.1.
However, buyers in London had to wait slightly longer, with the average first time buyer getting onto the property ladder in the capital at the age of 34.5 in 2017/18 compared to 34.1 in 2016/17.
How much money is needed for a deposit?
Following the financial crisis of 2007, many lenders tightened their criteria and demanded greater deposits from home buyers in a bid to minimise the risks commonly associated with lending. However, in the last couple of years, many mortgage providers have begun to relax the rules a little, while still being cautious not to resort to lending behaviour that contributed towards the financial crash in the first place.
The survey found that last year, of the 785,000 first time buyers in England, more than two-thirds paid a deposit of less than 20% of the property’s purchase price. Just 11,000 (1.5%) took out a 100% mortgage, 149,000 (20.6%) had a deposit of less than 10% and 330,000 (45.5%) put down between 10-19% of their property’s value.
Which schemes are available to help?
Getting on the property ladder is still incredibly difficult, particularly for those who need to save a deposit while also paying rent each month. However, there are a number of schemes available to help savers grow their house deposit faster.
For example, the Help to Buy ISA allows first time buyers to save up to £200 a month towards their deposit (£1,200 in the first month) and benefit from a 25% government top up when they’re ready to purchase a house. The Lifetime ISA works in a similar way except it allows first time buyers to save up to £4,000 a year in the account. The two ISAs also have different rules in terms of the amount of time the account must be held for before the government bonus can be used.
