It takes an average single first time buyer in the UK 11 years and nine months to save a 15% deposit for a home but being able to buy with a lower deposit cuts the time considerably, according to new research.
Reducing the deposit to 10% cuts three and a half years off the saving time to eight years and three months and a 5% deposit cuts seven years and nine months off the time to save a deposit meaning it takes just four years to save a deposit.
The analysis from Hamptons International, based on figures from the fourth quarter of 2016, took into account changes in incomes, prices and the cost of essentials, and also found that a single person in London would need to save for 18 years and three months for a 15% deposit while for a couple it would be 11 years and three months.
It points out that the proportion of loans made at 90% or more was 5% in 2016, up from 3.8% in 2015 and this increasing availability of lending at higher LTVs, combined with lower mortgage rates has improved the ability to buy for first time buyers.
But, it suggests that the greater availability and lower cost of higher LTV mortgages make a big difference to the period a first time buyer needs to save. Loans above 90% now account for more than three times the proportion of all loans than they did after the economic downturn of 2009.
It also points out that the cost of borrowing at over 95% has fallen by more than other types of loans. So raising a 10% deposit rather than 15% cuts the time to save for single buyers by three years and six months to eight years and three months and a 5% deposit cuts the time to save to just four years.
In London saving a 10% deposit cuts five years and nine months off the time it takes a single first time buyer to save a 15% deposit and a 5% deposit cuts the time by 12 years to six years and three months.
‘It still takes an average single buyer nearly 12 years to save a 15% deposit for their first home. That’s a whole year longer than at the end of 2015,’ said Fionnuala Earley, residential research director at Hamptons International.
‘But it’s not all bad news. Lenders are increasingly offering higher loan to value mortgages and the rates charged on them have come down more than for any other mortgage type,’ she explained.
‘Taking advantage of Help to Buy or taking out a 90% mortgage means that the time to save a deposit falls substantially. Rather than 12 years, a single buyer can save a deposit in just over eight. And if they use Help to Buy and save just a 5% deposit, they can save up in just four years,’ she added.
Meanwhile, separate research suggest that the process of buying a first home causes so much stress for some people it has made them ill or caused issues in their relationship. Some 40% felt they had to make so many compromises that they had to rebuild their life afterwards, according to research from Aldermore.
It also found that 17% took three or more attempts to buy their home and 27% had to delay buying a home by more than two years and one of the main challenges was saving for the deposit along with securing a mortgage and prices, especially in London and the South East.
