09 Jan, 2018/ by Homeward Legal /First Time Buyer
Finding the finance to buy a house has never been tougher for first-time buyers as new figures from Nationwide reveal that it would take a typical newcomer to the housing market an extraordinary eight years to save the deposit needed to buy a home.
That rises to nine years for buyers in the south-east of England and almost 10 years for those aiming to get on the housing ladder in London.
The building society revealed that a typical 20 percent deposit in London is now more than £80,000, but the average is closer to £20,000 across the rest of the UK.
The lender has analysed its mortgage data to explore affordability for first-time buyers in its monthly house price index. Its findings report: "A 20 percent deposit in London is now in excess of £80,000 (based on the average first-time buyer house price). This is around £30,000 higher than a decade ago.
"In other regions, such as the Midlands and northern England, deposit requirements are similar to 2007, though it should be noted house prices were at or near their pre-crisis peak at this time.
"It is arguably even more challenging to save for a deposit than it was a decade ago, due to falling real earnings (i.e. after taking account of inflation) and lower interest rates for savers."
The Nationwide estimated the number of years it would take the typical buyer to save a 20 percent deposit, based on saving 15 percent of their take-home pay.
Its report said: "In most regions, it would take around eight years for the typical buyer to save for a deposit. This rises to nine years in the south-east and to nearly 10 years in London, even though the prospective typical buyer in the capital is in the top 10 percent of the income distribution."
Since the financial crash almost a decade ago, lenders have applied much stricter criteria to borrowers to ensure they can afford mortgage repayments even when interest rates change.
Those tougher rules also mean first-time buyers need a bigger deposit than ever before, and as the Nationwide analysis shows, that means years of saving for most.