It has recently been suggested by Nationwide building society that first-time buyers typically save for around eight years to afford a deposit to buy their first home. This is the average length of time in most regions calculated and based on buyers managing to save 15% of their take home pay per annum. This rises to nine years in the South East of England and to nearly 10 years in London.
Finally, there is some good news though as in the recent budget the abolition of stamp duty for first time buyers on homes up to £300,000 will help considerably as this change means an average saving of £5,000. Even those who buy more expensive properties up to £500,000 will obtain a stamp duty break for the first £300,000.
Nationwide have calculated that the average (20%) deposit countrywide needs to be circa £20,000 with this rising to over £80,000 for those trying to buy properties in London. This is considered to be significantly higher than a decade ago based on the squeeze on wages and low interest rates.
Lenders may also set stricter affordability requirements since the financial crisis, to avoid financial stress on individual borrowers. This has made it increasingly difficult for first time buyers and many have turned to parents and other relatives to help them.
The so called ‘Bank of Mum and Dad’ or ‘Bank of Granny and Grandad’ are becoming increasingly called upon to help their young relative to get on the property ladder.
For those not lucky enough to have this family funding option, the only other alternative is to simply save for longer. The traditional high spending power of the young once referred to as DINKY’s (Double Income No Kids Yet of the 1980’s) is a thing of the past. They are now required to put all their spare change into a home if they want to get on the housing ladder.
The demand for mortgages remains relatively stable, so mortgage lenders still have plenty of customers. Bank of England figures show that 65,139 mortgages were approved during November for new and existing borrowers. This is very close to the average of the previous six months. The total value of these loans was circa £11.9bn.