First-time buyers are saving up to 10 years for a house deposit – how much do you need to buy a house?
NEARLY one in four first-time buyers say it took them between five and 10 years to save up enough for a house deposit.
The struggle for the so-called "Generation Renters" to get onto the property ladder is illustrated by the fact that 69 per cent of first-time buyers took more than two years to build up a deposit, while 23 per cent had to save for up to 10 years.
Buyers are still heavily reliant on support from the "bank of mum and dad" when it comes to purchasing their first home, with 29 per cent of buyers getting cash contributions from parents.
A further 8 per cent were given financial help from other family members, research from Which? Mortgage Advisers found.
Building up a big mortgage deposit is beneficial because it can help buyers secure access to cheaper mortgages, as banks will see you as less "risky".
And bigger deposits generally result in more affordable mortgage repayments, as there is less money to pay back.
But with house prices in the UK continuing to soar, first-time buyers are finding it increasingly difficult to save enough.
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Average house prices across England and Wales hit £278,750 last month - and a staggering £578,381 in London.
In the current environment, you’ll need a deposit of at least 5 per cent of a property’s value to get a mortgage, meaning first-time buyers will need a deposit of around £14,000 in England and Wales, and £29,000 in London.
But this is the absolute minimum you'll need. Buyers are advised to save more in order to get better mortgage deals, and to pay less in monthly repayments.
The cheapest mortgage deals on the market will typically require you to have a 40 per cent deposit or more - so on a £250,000 house, that's a huge £100,000 deposit needed.
This is an unrealistic figure for most people, and in fact the average mortgage deposit for first-time buyers is 17 per cent.
How to get help buying a house
THERE are several government schemes available to help you get onto the housing ladder.
- Help to Buy loan: This scheme is for those who have a 5 per cent deposit, and is only available on new-build properties that are worth less than £600,000. The government lends you up to 20 per cent of the property value (interest-free for the first five years) which gives you access to cheaper mortgages. You will need to pay this back at the end of the mortgage or when you sell.
- Starter Homes: First-time buyers under the age of 40 can access this new scheme. You'll get a 20 per cent discount on the market value of the property (new-build only) but you cannot sell or let the property for five years after you buy it.
- Shared ownership: This scheme is available to non-homeowners who earn £80,000 a year or less (£90,000 in London). People can buy a share of a home from a housing association and continue to rent the remainder. Buyers will need a 10 per cent deposit as well as money to cover stamp duty and other fees. You'll also need to find a mortgage lender that is willing to lend on shared ownership properties.
Which? has launched to help you work out how long it will take to save up enough to buy your dream home.
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.
“Given how hard it can be to get onto the property ladder, ensuring you have the right mortgage could not be more important. "Seeking independent mortgage advice early on is vital in order to know what options are open to you.”
Remember, there are other costs associated with buying that you'll need to save up for too, including stamp duty, legal fees, property surveys and mortgage arrangement fees.
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