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First time buyers still require £50k deposit

Written by on 19 March, 2010

According to the latest house prices and affordability index, first time home buyers in the UK still need an average deposit of over £50,000 to get on the property ladder. The figures, which were published by online property website Findaproperty.com in the March report, show the difficulties many buyers will still face, with these numbers forcing many to stay in rented accommodation.

This average deposit required for first time buyers currently stands at £51,700, which is down from the £55,200 required according to February’s report. Compared with December 2008’s figures of £70,300 however, some industry experts believe that now is the easiest time for new buyers to purchase since the economic downturn struck in late 2008.

The figures, which are understood by the report’s ‘affordability gap’ represents the amount of capital buyers must raise to purchase their first time home. This deposit required is calculated according to the maximum mortgage achievable with the average first time buyer household income.

The current first time buyer asking prices for homes currently stands at £154,684, a rise of 0.4% on last month, however the large initial deposit payments required have made it a daunting task for many buyers to take the plunge. When asked, 50% of respondents surveyed in the report mention that raising a deposit was the biggest barrier to owning their first property.

The report, which is based on figures from the Council of Mortgage Lenders shows that even individuals able to borrow large sums still need to raise large deposits to make their purchases. The long term average deposit for a home, which has averaged under 10% have long since gone, with banks being more guarded about their lending. Mortgage interest rates also remain substantially high for any mortgage applications with less than a 25% deposit.

There are currently only 152 different mortgages available in the UK for buyers with a 10% deposit, although this increases to 345 different products for a 15% deposit against the value of the property. Without a spotless credit history or secure income, most first time buyers will struggle to be accepted for a 90% loan to value mortgage, something which was common prior to the worldwide credit crisis.

With more individuals have to rely on rented accommodation, long term financial security for many prospective home buyers remains in the balance.

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