First-time buyer’s deposit soars to over £45,000!

  • May 26th 2022

With property prices continuing to rise over the last ten years, especially during the last two years due to the pent-up demand caused by the pandemic, first-time buyers now have to place a much larger deposit to buy their first home.

On average, a first-time buyer needs to place a deposit of over £45,000 compared to £23,000 over ten years ago.

Although lenders are now starting to offer more first-time buyer mortgages since the pandemic, which requires a smaller deposit, first-time buyers are constantly chasing to save up due to the rise in property prices.

Even with government initiatives such as the Help-To-Buy Scheme, first-time buyers have to save up more each day to take their first step onto the property ladder.

Rental demand and inflation have also increased property rental prices, making it more difficult for a first-time buyer to save for a deposit. This, combined with the continuing rise in property prices, has meant that a much larger deposit is required to jump onto the property ladder.

Over ten years ago, the average first-time buyer's property would cost £138,973, with the average now being £227,846. The average deposit required by lenders has also risen to 20% for first-time buyers.

Compared to 10 years ago, first-time buyers now have to pass stricter lending criteria, alongside tougher stress tests imposed by lenders.

In some cases, first-time buyers are refused a mortgage, even though they may pay a much higher rental amount than what their mortgage would be.

However, it's not all doom and gloom for first-time buyers. Lenders are constantly offering new mortgage products to accommodate the growing demand from first-time buyers.

Buyers with a small deposit can also benefit from the government's mortgage guarantee scheme, which offers a 95% mortgage.

The lifetime ISA is still available, offering a 25% government bonus, with a maximum of £1,000 annually.

The Help-To-Buy Scheme allows first-time buyers to purchase a new-build property with a 5% deposit, where the government lends 20% interest-free for five years.

With more schemes coming into place and lenders offering new mortgage products for first-time buyers, there is certainly a way to take the first step to the property ladder.

At Seths, we have helped many first-time buyers find their ideal home and have guided them through every step of the process. If you are looking to take your first step onto the property ladder, speak with our dedicated team today.