Average deposit needed by first time buyers in UK is now above £50,000
The average deposit put down by first time buyers in the UK is £51,821 which could rise to £65,930 in five years and in 10 years reach £81,468, according to new research.
Meanwhile, the average deposit needed by a first time buyer in London is set to rise to almost £250,000 by 2027, the study from mortgage advisor L&C Mortgages suggests.
It also reveals that a quarter of first time buyers haven’t saved anything towards a deposit and by 2027 first time buyers could need 28% of a property’s value as a deposit.
Looking at different cities across the UK, deposits are set to rise nationwide with the required amount going up by 75% in the next 10 years in London, 62% in Brighton and Hove and 59% in Bristol.
By 2027 the average deposit for a first time buyer in London could go up to £244,842, up £104,855 from the current £139,987 it is today. Even in Belfast, the city with the lowest percentage increase over the next 10 years, deposits could rise by 41% by 2027, jumping up from the £29,682 needed today to £41,755 in a decade’s time.
Other locations likely to see a substantial increase in first time buyer deposits include Norwich with a rise of 55% from £40,890 to £51,626 in 2022 and £63,364 in 2027. First time buyers in Edinburgh also face a 55% rise from £37,661 currently to £47,467 in five years and £58,204 in 2027.
‘With this research predicting that the size of deposits required could rise considerably across the country, first time buyers could be forgiven for giving up hope on owning their first home,’ said David Hollingworth from L&C.
However, he pointed out that there is some stark variation between cities but the fact that London deposits could be almost hitting a quarter of a million pounds by 2027 is alarming. ‘It makes sense for first-time buyers to try and raise as big a deposit as possible but that is very much easier said than done in today’s current climate,’ he explained.
‘Although there are mortgage deals available to as much as 95% of the property price, rates on these types of deals will be higher than for those who have saved a larger deposit. Given the level of commitment that first time buyers are having to make it’s of little surprise that they are often electing to fix their mortgage rate, so they know where they stand with their mortgage payments,’ Hollingworth added.
The research also looked at the attitudes of first time buyers in the UK, asking how they are planning to raise their deposit. On average, first time buyers expect 44% of their deposit to come from their own cash savings, with a further 15% coming from a Help to Buy ISA and 6% coming from a Lifetime ISA. A further 11% is expected to come from a sum from parents or other family members, and 6% will come from an inheritance.
It found that those first time buyers looking to buy in the next 10 years anticipated they would need £35,402 on average for a deposit but the average £51,821 deposit put down today is almost half as much again.
On average, first time buyers have currently saved up £16,436 toward their deposit, and predict it will take three years and eight months in total to raise the full amount. The current savings level doesn’t even amount to a third of today’s average deposit and 24% of first time buyers haven’t saved a penny towards a deposit.
‘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. As a result the Bank of Mum and Dad will no doubt continue to play an important role for those attempting to get on the ladder. Parental and family assistance will often help to build a deposit but can also see them providing a guarantee or additional collateral, to secure the mortgage needed,’ Hollingworth said.
‘Although improvements to supply of the right type of housing will be required, it is clear that from a practical point of view first time buyers will need to try to make regular savings as early as possible. Schemes like the Help to Buy and Lifetime ISAs can be helpful options for boosting your deposit, especially when contending with high rents,’ he explained.
‘On top of this, the Budget announcement to scrap stamp duty for first time buyers on properties worth up to £300,000 will help those who are struggling with the challenge of saving a deposit. The other positive at the moment may be that mortgage rates are extremely low but it’s important to get professional advice on the right options,’ he concluded.