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Home Buyers Struggling to Raise Deposits

First Time Buyers Up in 2017, but Deposits Still a Stumbling Block

After years in decline, the number of first time buyers rose in 2017. But so did the average deposit they needed to get a foot on the property ladder.

Over the past decade, the number of first time buyers has been stuttering, as those looking to strike out on their own have struggled against a tide of rising house prices. But figures released by the Halifax suggest that 2017 saw a turnaround, with around 359,000 first time buyers completing their purchases during the calendar year. This is almost back to the number reported in 2007.

Yet while the figures give cause for cautious optimism, mortgage brokers in Essex warn that the average deposit first time buyers need to find has almost doubled over the same period, from less than £18,000 in 2007 to more than £33,000 in 2017.

Help to buy

The report suggests that low interest rates and the government’s help to buy scheme have combined to push younger individuals and couples back toward the idea of buying. This comes after several years in which a growing number have seen little option but to rent. This has led in turn to the growing trend of those with money in the bank choosing buy to rent as a lucrative investment option, and making more people than ever into private landlords.

Are the latest statistics an indicator that home ownership will see a swing back towards owner occupiers? Perhaps, although in some areas, it is still almost impossible to amass the necessary funds to put down a deposit.

Geographic variation

It will come as no surprise to hear that the most expensive place to set up home is London, where the average deposit needed is an eye-watering £112,206. In the borough of Brent, the average first time property price was around £365,000, almost 13 times the gross average earnings for UK citizens.

At the other end of the scale, the picturesque borough of Copeland, on the edge of the Lake District in Cumbria, was the most reasonable, with the average price of around £82,000, or just under three times the national salary.

The nationwide average price paid by first time buyers is about £208,000, and the average in Essex stands at around £250,000. This is still more than eight times the average salary. However, more first time buyers are setting up home in the south east than anywhere else. How are they managing it?

Longer mortgage terms

Government initiatives might assist with the problem of finding that all important deposit, but that still leaves the balance of the mortgage to consider. In days gone by, the traditional calculation involved three times the household income for a mortgage over 25 years. Today, there are far more variations.

As house prices have risen faster than salaries, a growing trend has emerged towards longer mortgage terms. Ten years ago, 48 percent of first-time buyers went for a mortgage term between 20 and 25 years, and 38 percent were between 25 and 35 years. Today, the pattern has essentially reversed. Just 26 percent go for a 20 to 25 year mortgage, while 56 percent have gone for a term in excess of 25 years.