One of the biggest obstacles facing first time buyers is saving enough money for the deposit, and new research from Which? Mortgage Advisers has shed some light on the steps people are taking to try and raise this money.
Saving for a Deposit
According to the research, one in five (22%) first time buyers who saved each month for a deposit moved back in with or continued living with parents. Nearly four in ten (37%) worked overtime, and one in five (19%) went as far as selling their personal belongings to help raise more funds.
The study also found that six in ten (62%) first time buyers set aside money every month to save for a deposit on their first home.
The difficulties first time buyers are facing is reflected in statistics from the Institute for Fiscal Studies, which show that home ownership among young people has fallen significantly in the past two decades.
Despite the high levels of commitment to saving, first time buyers apparently continue to rely heavily on money from other sources, with a recent report indicating that the ‘bank of mum and dad’ was expected to lend approximately £6.5 billion in 2017. Which? found that a third (31%) of first time buyers used money that they had inherited to support their deposit and three in ten (29%) received a contribution from a friend, family member or someone else.
Rising Property Prices
Almost half (46%) of first time buyers had a maximum deposit of 10%, but with property prices continuing to rise throughout the country, even this amount is out of reach for many. The average property price in the UK is £234,794, which means to have a deposit of just 10% requires savings of over £23,000, without factoring in the additional costs of buying a property.
“For many, the prospect of saving a deposit for a first home can be daunting, unrealistic and even downright depressing,” commented David Blake, Principal Mortgage Adviser, Which? Mortgage Advisers.
“However, there are various options out there for first time buyers, from Help to Buy ISAs to equity loans, and even shared ownership,” he added. “Consider speaking to an independent expert who can offer advice tailored specifically for you.”
Buying v Renting
However, those who do manage to take that first step on the housing ladder will ultimately be financially better off compared to those who rent, with new research revealing that first time buyers in Scotland save £31,000 on average when buying their own home instead of renting.
According to Bank of Scotland, which conducted the research, the average monthly costs associated with buying a three-bedroom house stood at £503 in December 2017 - £103 lower than what it typically costs to rent the same sized property (£606). This can save first-time buyers £1,240 per year.
The research also found that the number of first-time buyers in Scotland reached 35,500 in 2017, compared to 31,600 in 2016 – the highest level since 2006 (39,100).
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