Is Affording a First Home Deposit Harder Than Ever Before?

Since the Coronavirus pandemic first broke in early 2020, lenders have become stricter with borrowing and many high street banks have paused the availability of 95% mortgages. Many first-time buyers are now claiming this is making getting onto the property market harder than it has ever been before.

What Does Data Reveal About the Average Deposit for First-Time Buyers?

The Guardian recently reported that three in ten young households in the UK do not earn enough to pass lenders’ affordability checks for an 85% mortgage. The research carried out with Hamptons International compared average property prices across the UK and found that the average first-time buyer would now need a household income of £37,096 to get a mortgage with a 15% deposit.

Making the assumption that these households would be made of two full-time working people, the paper claims 70% aged 22 to 29 years old would be able to achieve that income level. However, they would still need to raise a deposit of £29,458 to afford the average starter home.

Looking at different areas of the UK in greater detail, it was revealed that affordability varies greatly.

Although unlikely, should a first-time buyer decide to purchase in one of the UK’s most expensive counties, Kensington and Chelsea, the average property costs £1.1m. A property purchase of this value would require a deposit of £112,526 and household earnings of £225,052 – with both of these figures higher than the average property price in some parts of the UK.

““For first-time buyers with smaller deposits, getting a mortgage is becoming harder by the day, and the natural escalation of renters to buyers looks set to be disrupted until lenders regain confidence and become more comfortable again at higher loan-to-values. The result will be increased demand for rental property, which will almost certainly mean upward pressure on rents in the months ahead, just as the full impact of Covid-19 on the economy starts to bite. The winter looks set to be a challenging one for first time buyers and tenants. In the meantime, landlords are likely to continue to take advantage of the situation. To achieve their goal of getting onto the property ladder, tenants will need to become savvier with their planning and more streetwise with their choices than ever." ”

RenterBuyer
Olu Olufote
Chief Executive

We Can Source Your First Time Buyer Mortgage

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Article By Chris Evans

November 19th, 2020

Chris heads up the specialist mortgage team which encompasses first charge mortgages, buy-to-let finance and second charge loans.

Chris has spent the last 17 years gaining experience in mortgages, protection and secured loans with roles at Legal & General, Nemo and Mortgage advice bureau giving him a broad understanding of the property finance markets.

Having Joined the Pure Group in 2017 he has worked with Ben to establish and grow the 1st and 2nd charge proposition exponentially in a short period of time. Chris has overseen the recruitment and development of an extremely experienced team of employed and self employed advisers that continues to deliver year on year growth.

See more articles by Chris

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