Market Insight - September 2018
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Time to Save

Time to save

Raising a deposit continues to be the biggest barrier to getting on the housing ladder.

The cost of buying a home is expensive. It’s not just the financing of monthly mortgage payments that need to be taken into account, but take one step back in the buying process, and saving for a deposit continues to be one of the biggest barriers to getting an actual foot on the housing ladder.

It now takes the average single first-time buyer in England and Wales, 10 and a half years to save for a typical 15% deposit – or 17 years if they’re buying in London. This figure has changed little since 2017, when it took a fraction longer at 11 years.

The research, which covers the first three months of the year, takes into account how much a buyer might be able to save after tax, national insurance, rent and council tax. It also considers essential spending on food, transport and utility bills and assumes that households are able to put aside 22% of their income to save towards a deposit.

On this basis, couples have it slightly easier. Sharing bills and pooling savings means that they’re able to amass a 15% deposit in half the time it takes a single buyer. A couple saving for a 15% deposit in England and Wales today, will need to save for five years before they can raise enough to qualify for a mortgage and buy their first home. If they want to buy in London, it would take them eight years.

However, it’s much quicker to save a 5% deposit – the minimum needed to take advantage of the government’s ‘Help to Buy’ scheme. Under the terms of the equity loan part of the scheme, the government lends a buyer up to 20% of the cost of a new build home, leaving a 5% deposit and 75% mortgage for the buyer to find and manage.

Saving for a 5% rather than a 15% deposit means that first-time buyers can save and move into their new home significantly faster. In the case of a single first-time buyer, it’s over six and half years faster (it would take them three years and nine months to save a 5% deposit). And for a couple putting money aside for their 5% deposit, it would take just one year and nine months – three years and three months faster.

In London, the higher costs of buying a home mean that it takes longer to save. The time to save for a 5% deposit in the capital rises to three years for a couple and five years and nine months for a single first-time buyer.

There are other regional differences too. The area where a first-time buyer can move into their new home fastest is in the North East where it takes a couple saving for a 15% deposit just under three years (two years and nine months), and a single person six years and three months. While saving for a 5% deposit is even faster – just one year for a couple and two years and three months for a single person.

 

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