First-Time Buyer Deposits set to rise 57%

First-Time Buyer Deposits set to rise 57% over the next 10 years

First-time buyer deposits are predicted to rise by almost 60% according to L&C Mortgages.

Currently, the average deposit for first-time buyers is a whopping £51,821 and could go up to as much as £65,930 by 2022. It is estimated that by 2027, first-time buyers may need to put down a deposit of a further 28% bringing the deposit up to (on average) £81,468 which is a further increase of £29,647 from the current average deposit put down.

Comparing cities across the UK, deposits are likely to rise by 75% in London in the next 10 years, 62% in Brighton and Hove and 59% in Bristol. Even in Belfast, the city with currently the lowest percentage rising over the next 10 years, deposits could rise to 41% by 2027.

Mathew Wood, Managing Director of Orchards Estates said “If this predicted research is correct, then its easy to see why first-time buyers are giving up all hope on ever owning their own home. In South Somerset, the average deposit for first-time buyers is only 5% which, if in keeping with the pattern of the rest of the country, this will make things incredibly hard for applicants within our community. One saving grace for first-time buyers is the abolishment of stamp duty but here’s hoping the government will offer more support and schemes to buyers”. 

It makes sense for buyers to save as bigger deposit as possible to reduce mortgage repayments but that is easier said than done in today’s current climate. Yes, 100% mortgages are still available if you know where to look, but rates on these types of deals will be higher than if a purchaser has a higher deposit. Looking at the level of commitment first-time buyers must make in order to buy their first home, it’s not of great surprise to see that the majority are choosing to have a fix rate mortgage to keep a constant track of their repayments. 

So where is a first-time buyers deposit expected to come from? Well, L&C have also looked at the opinions of first-time buyers in the UK and on average, buyers expect 44% of their deposit to come from their own cash savings, with another 15% coming from a Help to Buy ISA and 6% coming from a Lifetime ISA. A further 11% is expected to come from a parents/relative’s donation and 6% will come from inheritance.

Research has found that first-time buyers looking to buy in 10 years’ time anticipated that they would need £35,402 on average for a deposit compared to the current UK average of £51,821. On average, buyers have currently saved £16,436 towards their own deposit and assume it will take just under 4 years to save this amount. The current savings level doesn’t even amount to a third of today’s average deposit and almost 24% of first-time buyers haven’t managed to save a penny towards a deposit.

Clearly, improvements need to be made to the type of housing first-time buyers can expect to purchase and it’s fair to say that people wanting to buy, need to get saving as quickly as possible! Schemes like the Help to Buy and Lifetime ISA are helpful options for boosting deposits – even more so when facing high rent payments and managing living costs.
In addition to this, the Budget announcement to scrap stamp duty is a saving grace and with low mortgage rates set to stay as they are for the moment, there does seem to be a silver lining.

Its extremely important to get professional and unbiased advice on the right options for you and Orchards Estates can offer help and point you in the right direction. If you have any questions, we’ll be happy to assist so give us a call on 01935 277977 or 01460 477977.

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