A survey has found that first-time buyers need to save up for an average of eight years before they can afford a deposit, compared to just one year in 1995. So what’s behind the drastic increase?
Research from Barclays has found that it took people just one year to save up for a deposit in 1995, with savers needing just 5% of the property price on average. Fast-forward 17 years, and a deposit will take eight years of saving and will cost 20% of the property price, causing many to turn to the Bank of Mum and Dad for help.
This research doesn’t come as much of a surprise. My parents’ generation may have been able to buy their first property just a few years after leaving home, but for my age group, this seems as much a part of history as flared jeans and Chopper Bikes.
Decades for a deposit
These days – soaring rent prices, lack of job security and increasing transport costs often make it difficult for savers to put aside any money at all. Our study last year found the amount we spend on anything other than essentials is at its lowest in 20 years. On top of this, housing costs take up 28% of our budget compared to just 14% in 1965.
I live in London, which means it’ll take me even longer to save up for a deposit. Aspiring home-owners have to save for an average of ten years to get on the ladder in the capital, in stark contrast to just 11 months in 1995.
Those looking for a property in the North West and Wales have the lowest average saving time, with a wait of four years and 11 months. So why does it take so long to save in London? Analysts believe it’s because many underestimate how much a deposit will actually cost.
The reality is that a deposit on a London property will often come in at a hefty 20% of the value, or £70,000 on average. That’s almost double the deposits in Reading – second most expensive area to buy in the UK. According to research by mortgage provider Castle Trust, deposits in Reading come in at £39,789 on average.
The future’s bright(er)
Eight years is a long time to wait to get on the ladder, with many of us turning to our families for help. In fact, Barclays found that 60% of Brits ask their mum and dad for financial help – but only half of them actually get it.
But there is some good news. The figures are better than they were at the height of the housing crisis in 2009, when first time buyers faced a 10-year average wait. In addition, a recent Which? Money survey showed that high loan-to-value mortgage deals: 90% and 95%, have started to appear again. Meanwhile, government schemes such as NewBuy and FirstBuy are helping to provide an alternative for those who can’t get family help.
Being in my mid-twenties, I think I should probably start saving now. After all, the average age of a first-time buyer is now 35, compared to just 24 in the 1960s. Did it take you long to save for your first property? If you’re still saving, do you have far to go?