Many UK first time buyers still struggling to save a deposit, research suggests

The need for a large deposit to buy a first home in the UK is still hampering the hopes of many buyers despite government schemes like Help to Buy, it is claimed.

Two in three aspiring first time buyers can’t get the necessary deposit saved and just 17% are actually able to save regularly each month, according to research by mortgage insurance provider Genworth.

It points out that the return of 95% mortgages cuts saving time by over three years and by six years for first time buyers in London. But even with the government help schemes some 62% of would be first time buyers still cannot afford a deposit.

A further 19% cannot afford the monthly mortgage payments for the home they desire and only 32% of aspiring owners are actually saving for a deposit.

Regular savers put aside an average of £393 a month for a deposit and at this rate, it would take them a year and seven months to raise a 5% deposit of £7,792 for the average first time buyer home in the UK, and three years to do so in London.

Without Help to Buy phase two boosting access to high loan to value (LTV) mortgages, they would face a wait of nearly five years or nine years in London, to save a 15% deposit for an 85% mortgage, the typical maximum LTV for first time buyer products before Help to Buy was introduced.

However, the research also indicated that despite speeding up the time needed to save for a deposit, there is widespread ignorance about Help to Buy phase two with 40% of aspiring home owners having no knowledge of the scheme or no understanding of how it works.
Optimism about getting a mortgage has grown among those aged under 30 since Help to Buy phase two was launched and 37% of aspiring home owners in this age bracket feel their chances have improved in the last six months, while just 16% feel the opposite. But would be owners above the age of 30 have grown more downbeat overall.

Just 5% of aspiring home owners expect to buy their first home in the next 12 months and 73% do not expect to do so before 2017 when Help to Buy phase two is due to end. Some 36% feel they have no prospect of buying a home in the next 10 years and 33% have given up hope of ever raising enough for a deposit.

‘We should be under no illusion that the problems confronting first time buyers will disappear overnight. Raising a deposit of 15% or more is an insurmountable challenge not just for younger generations, but also for many in their thirties and forties who have been locked out of the property market for most of their adult lives,’ said Simon Crone, Genworth vice president.

‘Help to Buy phase two has made a start at returning 95% mortgages to their rightful place in the mortgage market. But it is a long term challenge that needs a long term solution. We cannot simply desert aspiring buyers after 2016. The government needs to set out the next steps and look at how private insurance can make competitive 95% mortgage products a permanent option,’ he added.

The research also suggests that the demands of buying property are impacting on family life. The financial challenge of raising a deposit means aspiring home owners are becoming less likely to get married or start a pension before buying their first home, compared with existing owners.

Aspiring buyers are also twice as likely to have children without the stability of owning the family home and 20% plan to do this, compared with 10% of existing owners who did the same. And some 34% are side lining a host of life events in pursuit of home ownership as they have no plans either to marry, start a family or begin saving for retirement before they buy a home.

‘Taking years to save a 15% deposit is asking far too much of many people and will have disastrous effects by turning them away from property for good or forcing them to put other important life events on hold. Raising a 5% deposit is far more realistic and far healthier for society providing people can safely afford their repayments,’ added Crone.