New research has revealed just how hard life is for would-be first-time buyers.
Whilst interest rates remain at historically low levels, making monthly mortgage repayments more affordable and saving a large enough deposit, is still a significant hurdle for most first-time buyers.
New research, from the Halifax, shows that the average cost of a home for first-time buyers is now £207,693. Consequently, the average deposit is now an eye-watering £32,899. That’s 16% of the purchase price and well over the average annual income in the UK.
First-time buyers in London
Of course, we are particularly interested in how hard life is for first-time buyers in London.
It’s no surprise that life in the capital is harder for first-time buyers with an average deposit of £106,577 needed; that’s 26% of the average purchase price.
To emphasise the difficulties faced by first-time buyers in London, £106,577 represents just over three times the average salary of £34,390.
The research identified Brent as the least affordable area in London, with first-time buyers forced to part with an average of nearly £460,000 for their first home. That’s around 12 times the average earnings in the area.
Help for first-time buyers in London
So, if the main problem isn’t affordability, but building up a large enough deposit, what options do first-time buyers have?
Start saving early: The sooner would-be first-time buyers, or their parents / grandparents, start saving for a deposit the better.
Lifetime ISA: The Government has introduced various schemes to help first-time buyers, the latest is the Lifetime ISA. The scheme is designed to help first-time buyers save for their deposit with the Government adding £1 to every £4 saved. Whilst the scheme is complex and only open to people under the age of 40, for first-time buyers saving for a deposit, using it is a no-brainer.
Apply to the ‘Bank of Mum & Dad’: An ever-increasing number of parents are helping their children get on to the property ladder with gifts or loans. Clearly this isn’t an option for every would-be first-time buyer, but there’s no doubt it’s becoming more popular.
The ‘Bank of Gran & Grandad’: The introduction of Pension Freedoms has given people over the age of 55 far more flexibility in how they take money from their pensions. In fact, new research from the FCA (Financial Conduct Authority) has shown that most of the withdrawals made from pensions, under the new rules, have been done so by people who aren’t retiring. There are of course significant issues with opening the ‘Bank of Gran & Grandad’, not least that it could reduce their income in retirement. But again, it’s certainly an option growing in popularity.
First-time buyer schemes: Several schemes are available specifically to help first-time buyers get on to the housing ladder. They are designed to make buying a home more accessible and, in many ways, help to solve the deposit problem.
Here to help first-time buyers
Here at London Money we are passionate supporters of first-time buyers and will do whatever we can to help you get on to the housing ladder.
That’s why we’ve produced a guide, telling you everything you need to know about buying your first home. It’s free to download (we won’t even ask for your email address!) and it’s available by clicking here.
Alternatively, if you have already saved a deposit and need a mortgage to help you buy your first home then please get in touch. We’d love to help you. Call us on 0207 808 4120 or complete our online enquiry form by clicking here.