The average deposit needed for a house is ten times the amount required 20 years ago, showing just how hard it has become for first time buyers to get on the property ladder.
In 1990 the average deposit was £6,973 but that has now jumped to £65,924. Research by mortgage lender First Direct shows that, over the same period, average household income has increased by just 2.5 times, a quarter of the rate.
Buying a property has become much, much more expensive. But why?
While the rate of increase in house prices is dwarfed by the growth of deposit amounts, a property is still worth four times what it would have cost twenty years ago, a massive rise in its own right.
While houses and flats cost much more, banks are less willing to lend money – to the frustration of many – since 2008’s economic crisis. The result is the hardest housing market to crack since 1990, when Margaret Thatcher resided at 10 Downing Street, and Driving Miss Daisy picked up the best film gong at the Oscars.
With average deposits now a staggering 27% of average property value, most first time buyers are having to visit the bank of Mum and Dad or save over long periods to amass enough to put down on a home, especially in the South East.
Their plight is being exacerbated by the rise in rents that the housing market is currently seeing, with last month seeing the highest expansion in average rents for over a year. The average UK rent now stands at £713 a month, with that figure rising to over £1,000 in London.
Unless banks make money more available to good-quality first time buyers, that wait to get on the ladder shows no sign of shortening, and more and more people will be forced to rent, driving up what landlords can charge and putting pressure on people’s ability to save. It is a vicious cycle first time buyers need help to escape from.
