Taylor Scott International News
Over a third of aspiring first time buyers in the UK have given up hope of ever being able to raise a deposit to buy a home, new research has found. Currently first time buyers need as little as a 5% deposit to qualify for a mortgage under the government’s Help to Buy scheme but this is due to end in the first few months of 2017 meaning that first time buyers will then need a much bigger deposit. The research from mortgage insurer Genworth says that it will mean a return to 20% deposits which would see the time needed to save for a deposit rise from three years to over 10 years. The research also shows that of those who can afford to save for a deposit they are putting aside £246 on average each month. With 3% annual interest, someone who started saving today would need two years and 10 months to reach £8,655 and would hit this target by July 2017. They could do so by the beginning of 2017 by saving just £33 extra each per month. But the return to a norm of 20% deposits as was common in 2011 to 2013, would mean them needing to save £34,662 in 2017. With monthly savings of £246 gaining 3% annual interest, it would take a buyer more than seven years longer to do so. Anyone starting to save today would not hit this target until November 2024 by which time an extra seven and three quarter years of house price growth would be likely to mean they are still left unable to buy a home. The same Bank of England forecast of 20% house price growth over three years also means aspiring first time buyers could face prices which are rising far faster than they can save. Reaching £173,308 by the first quarter 2017 would mean the average first time buyer property price gaining £28,876 since the beginning of this year. This is 3.12 times the £9,249 a typical first time buyer can save up over a three year period and the equivalent of house prices gaining £3.12 for every £1 saved towards a deposit. The firm says that Help to Buy has given aspiring first time buyers a lifeline by boosting access to loans with deposits starting from 5%, making it far more achievable to buy despite the forecast rise in house prices. ‘Trying to buy your first home in the current climate is like chasing a runaway train. Even with good salaries that could comfortably support a mortgage, thousands of aspiring first time buyers can only save modest sums, especially those who are already paying rent. This deposit trap is why many feel they are left with the all or nothing choice of borrowing from family or waving goodbye to ever owning a home,’ said Simon Crone, vice president for mortgage insurance Europe at Genworth. ‘Help to Buy has significantly improved access to mortgages with deposits that are actually realistic to save. The numbers… Taylor Scott International
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