/ Money

The long road to a housing deposit

It will apparently take today’s average low-income family 22 years to scrape together enough to buy their first home. Is it really worth all the effort and sacrifice?

Last week was a landmark moment for me and my Herculean attempt to get a deposit together for a house. I filled up my cash Isa allowance, and three months before the new season begins too. I’m pretty proud I’ve managed to get that far over such a short space of time.

It’s a slightly hollow victory. For starters, my sister has been contributing to this little mound of savings (we’re buying together). If it wasn’t for her additions, I’d still have just 10% of the 10% needed to get my foot on the property ladder.

Adding up the cost of a deposit

Let’s do the maths on this. If it was just me, saving £200 per month, I’d probably need to save for a decade to buy a two bedroom place somewhere in London.

But then, factor in annual house price rises, say of 1% per year, and I’m going to have to save for another couple of years. If that growth pattern persisted, I’d have to pay stamp duty on my new home too, which would add an extra 3%, or another three and a half years to save.

Obviously, I’m not factoring in the tax-free interest on my savings, nor my capacity to earn and, consequently, save more. But by those calculations, it would take me 15 years to be able to buy a house. I’d be 41 by then.

So, I wasn’t surprised to read yesterday that it will take the average lower income family 22 years to save up enough money to to get a pot big enough for a typical deposit (£25,000). This is compared to three years of saving in 1997 and eight years in 2001, according to a Squeezed Britain report from thinktank Resolution Foundation.

Trials of a first-time buyer

The government is bringing in some new initiatives to help first-time buyers, but it seems people in my position face an improbable and lengthy hurdle to overcome.

One part of me thinks I should give up and remain a tenant. But, having just moved to a new home, my rental costs have increased by 10% this year, not to mention commuting fares up by 8%. I don’t want to carry on paying somebody else’s mortgage, and I want a place I can truly call my own.

Should I persevere? And if you’re in the same boat as me, how long do you think it will take to get your deposit together?


I read that recently. It was very depressing! My husband and I have been very lucky to be able to buy through a shared ownership scheme (though don’t get me started on the issue of builders completing on time!). Though we’ve still had some assistance for our deposit (22 years to save a deposit puts us well beyond 41).

Slightly off topic… but I heard the government are not extending the first time buyer stamp duty exemption because it’s not encouraged people to buy more properties. I guess that’s because deposits are still too high for people to save for. Plus there’s the fact that in cities the average 2-bed flat are still above the £250K limit. 3% of £250K or more is a lot of money to find to buy a place, on top of the deposit.

Also, the right sort of buildings are not being built. Where we’re buying they are finding the 1-beds taking longer to sell. I reckon that’s because people buy thinking long-term. While I’m happy to rent a 1-bed, because I know if I want to I can easily (relatively speaking) find a 2-bed, the whole hassle and expense of the buying & selling process means people will buy with a view to their future so they don’t have to buy again in 2 years time, even if it means an initial stretch of the old budget.

I came across a graph somewhere recently (think it was Andrew Ellson from the times?) which charted the rise in prices of gold, oil, etc.
Included on the same graph was the Halifax average house price – which was way above everything else.

It is hard for everyone, demographics aside, to get started.
Our home was valued at £22,000 8 years ago – today it is valued at closer to £90,000 which I find totally unrealistic.
Although the housing industry has played a major part in the current scenarios we find, a great deal of damage was done thanks to the previous government.
With pension rules being changed, eg, allowing businesses to borrow using pension funds as security, to pay for development, expansion, new machinery, etc, whilst at the same time, unknowingly? opening loopholes for businesses to sell off parts of their company and making pension funds transferrable – one friend paid over £30,000 in and got just £2,000 back – people moved their funds into property, which was more stable at the time.

The end result has left us with a nation of renters and only those that made it up the ladder before it was raised (eg, policy was tightened) were able to benefit from it, which was more luck than skill.
The solution?
It’s a huge struggle, people living at home longer, people needing more support if living at home is not an option, people overstretched on borrowing just to get a foothold, etc, it is a nightmare.
The longer it goes on, the higher renting has become.
More social housing? This will take time, time that many don’t have. People are already chasing their tails to keep their heads above water, if interest rates increase, which they will have to do once the economy starts to pick up – if only to remove all the “quantitive easing” thats being done – it looks like only a gradual solution can be found, over the next decade if not longer.

Perhaps it’s time to seek help for this plight from outside the normal areas/people and look instead at short term projects. As we have all seen in some form or another, long term solutions don’t always bring the results that are promised.
What about making it attractive to move funds from property back into protected and/or guaranteed pension funds?
Maybe something like this will bring down house prices and lower demand in a small way that can allow for new buyers to get on to the market?
I feel for house buyers in today’s climate, I really do.

Sophie Gilbert says:
25 January 2012

Someday we will have a culture here in this country where renting isn’t something to be ashamed of, and landlords will cotton on to that, reduce their rents and keep their tennants for life, and these tennants will have somewhere they can call a home. Someday.

Don’t think they ever will lower their rents Sophie, as most are tied into huge mortgages, if anything, as incomes get squeezed the price of rents will increase to make a bit of extra cash for the owner. This will be followed by interest rate rises to take all this newly printed money out of the economy.
The whole issue of housing needs a fresh approach from people/bodies who have not been a party to the current situation the country is now in.

Suzanne says:
1 April 2012

Sophie, I absolutely agree with you. When will things change in this country..My relationship ended some 8 years ago, I also got made redundant at the same time, and as I wasn’t married to the man, and lived in his property for some 11 years – I had no share of the property. Hind sight is a wonderful thing, but now at nearly 58, I am at the mercy of my property rental company as they do NOT see rentals as long-term. In this country ‘rental’ properties are seen as a stepping stone to buying your own home, which 20 years ago, may have been feasible. But now, and certainly for me, buying a property as a single woman in Oxfordshire where I live is impossible. And I don’t want to keep moving every 2-3 years, I want a home I can call my own. I have been in my present property some 7 years and it’s lovely, but I get the feeling the landlord will want to sell it next year as he’s quite elderly now. So IF anyone knows of a scheme, perhaps a property company that buys properties to rent back to a resident tenant, please advise??

I have no problem paying rent, and never missed a payment, I just can’t manage to save a 100K for a deposit, and that would only be 50% for a property here. It really is a depressing situation to be in, shared by many I’m sure, so as I say any tips or advice really appreciated.

…in cities the average 2-bed flat are still above the £250K…

Had seen at estate agents such a flat in a fairly nice part of Ealing
in west London offered at £179,500 and a 20-22 minutes Tube
ride to Piccadilly Circus, nearest Tube just a few minutes walk

Goodness, really? Why were these places never available when I was looking!

Yup… I timed it many a time, using the miserable Central Line
that is well past its sell-by date as to the trains they use, takes
a few minutes more to Oxford Circus from Ealing Broadway
station… using First Great Western from same station takes
precisely 13 minutes to London Paddington.

The seating is quite disgusting compared to FGW’s.

When was this? I’d love a nice 2 bed in Ealing for that price!

Ealing Broadway also served by District Line with a more decent type
of carriages used, also both Heathrow Connect and Express to Paddington
…also a designated terminus when the £16 billion fast rail project
Reading to and across central London to the east is completed.

The flat I saw advertised at £179.5 k was in 2010 situated in South Ealing
still at W5, expect to pay a little/more for properties in W5 proper
than at say West Ealing W13 and/or dare I say, other slightly less desirable
residential districts in same London borough.

Of course no vested interests in saying what I said.

I discovered yesterday I’m still on the mailing list for the shared ownership scheme. I received an email offering shares from 30% in some ‘stunning’ flats in Highbury, north London. The two-beds were going for £335K. That’s almost double what ours is a little further up the Victoria Line! The lowest share (30%) was over £100K. And it would be liable for 3% stamp duty: that’s over £10K.

Even the 1-beds were over £250K, meaning 3% stamp duty at over £7K. Remember these schemes are aimed at first-time buyers with a total income of less than £60K. While you need less of a deposit – usually as little as 5% of the share purchase price – the stamp duty would be a serious chunk of money to find. Although with shared ownership you don’t have to pay it until you own 80% of the property (I was told), so people would have time to save up for it. But still, they’re not particularly first-time-buyer-friendly prices.

I was interested to see that they development wasn’t just offering 1 and 2-beds, but 3-bed flats. A little more family-focused. Though, the 4-bed private market homes near where we live at the moment don’t seem to be going very quickly.

John El Basha says:
14 October 2012

Dear Gareth,

While it may take a long time according to your calculation to save enough for your house deposit, you have quite rightly highlighted the effects of rising house prices.
It is not surprising that it takes so long to save, since the method of saving that most people use is a cash account in a bank which, as you know, attracts terribly low levels of interest – even lower than inflation. The result is that over the years which you are attempting to save, you cash is actually not catching up with inflation and is losing its buying power.

For this reason, it is much better to save using alternative investments that aim to deliver growth over the long medium and long term (3 to 10 years).

Rather than putting your savings into a cash isa, you can put them into a stocks and shares ISA. I did this, and my balance grew by 30% in one year. Another method of investment that has always proved reliable has been investing in gold. It is becoming very easy to buy and sell gold through websites such as bullionbypost.

In brief, it is true that you need a large cash deposit for your house, but it is not true that your savings need to be in cash for the period leading up to your big day!
Cash is trash!

Other people in this topic have already mentioned a second good point that is “renting is not a sin”. You do not have to go back to far in history when the majority of the people in the UK did not own their house. People used to rent for their entire lives up until housing and mortgages become affordable.
Our social make-up also plays a role in this. In many European countries such as Italy and Spain, the family unit is very strong and people do not leave their family homes until the day they get married. Usually, a large part of the marriage process is getting a large amount of money from people as a wedding gift that forms that majority of the house deposit. In the UK, independence is very important and thus people leave their family homes at a much younger age. As a result, we do not have the right culture to save money since we are leaving our family homes and leading independent lives from the age of 17-18…. You can’t have your cake and eat it!

Finally, if someone is interested in saving for a deposit, they need to work out if they are actually a net saver or a net borrower. There is no point in saving £200 each month into a bank account if you have credit card debt which is charging you £200 in interest each month. Settling personal debt is the first part before saving can really begin.



Киев СТО says:
18 February 2013

I get pleasure from, cause I found exactly what I used to be taking a look for. You have ended my four day lengthy hunt! God Bless you man. Have a nice day. Bye