First time buyers facing 10 years to save a deposit
Published by Max Salsbury for 24dash.com in Housing and also in Communities, Finance
Watchdog warns of 'one million risky mortgages'
First time buyers across England are facing 10 years of saving before they have enough for a deposit, new research has revealed.
And in London, FTBs are facing a daunting 24 years of saving before they have the funds for a deposit on their first home.
The figures from the Home Builders Federation's Broken Ladder report reveal that the average time taken to save a deposit has tripled in the last 10 years - and that the number of FTBs has fallen by 64 percent in the same period.
On average across England, without assistance from a government scheme or other help, somebody in their 20s wanting to purchase their first home (£175,265) would have to save a deposit of £35,053.
Even if they saved 33 percent of their net income, it would take them nearly seven years to put together the necessary deposit.
In 2002, a person in the same circumstances would have saved a deposit in 2.5 years.
The HBF says that when the costs of paying rent, utility bills and council tax while trying to save a deposit are factored in, the scale of the challenge faced by today’s young people becomes apparent.
This increasing ‘deposit gap’ has seen the number of FTBs plummet, creating a Locked-out Generation, says the HBF.
In the five years to 2002 the number of FTBs averaged 543,000 each year. In the last five years to 2012 that number has collapsed to 197,000.
However, the report notes that there are signs of hope and says that the Government’s Funding for Lending scheme has resulted in some thawing in the mortgage market
Government-backed schemes such as Newbuy and Firstbuy are also providing a lifeline for an increasing number of people who would otherwise be excluded from home ownership.
Newbuy allows people to buy a new build home with a five percent deposit, which cuts the average FTB deposit to a more realistic £8,763.
More than 3,000 people have reserved a home through NewBuy already and the first few weeks of 2013 have seen a big increase in the weekly number of reservations as more people become aware of the scheme and, crucially, lenders have cut the interest rates they are offering for the scheme.
Likewise FirstBuy, the Government/Industry-funded shared equity scheme that also allows people to buy with a five percent deposit had helped over 10,000 before running out of funds.
After pressure from the HBF, and realising its critical importance, the Government has extended the scheme deadline and allocated further funds that will help an additional 16,500 people buy their own home.
Stewart Baseley, HBF's executive chairman, said: "This report reveals the extent of our housing crisis and the challenge faced by today’s young people. Unlike previous generations that took home ownership for granted, today’s generation have a mountain to climb if they wish to own their own home. We are creating a locked out generation.
"However, there is some light at the end of the tunnel and there are now several ways for people to buy with a more normal deposit. Government backed schemes such as Newbuy are offering real options for people looking to buy – or move home – and we are seeing more and more take advantage."