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First time buyers in the UK need a £32,000 deposit to buy their first home as average deposits rise to their highest level in a year, new research shows. Despite Help to Buy providing those with small deposits access to high value LTV mortgages, lending is actually decreasing with the average deposit size up from a low of 16% in October last year to 20% or £31,807 now. The analysis found June’s average deposit of 20% to be the same figure as two years ago) before Help to Buy was introduced. Factoring in house price increases over the last two years also means that in monetary terms, the average deposit has risen by 9%, or £2,557, up from £29,250. The Genworth/Moneyfacts study also shows that current average deposit size is equal to 81% of an average first time buyer’s annual income of £39,065 highlighting the difficulty faced in saving such a substantial amount. Across all buyers, the average LTV for house purchase loans also dropped by 2%, from 77% in May to 75% in June. An average deposit of 25% is therefore required as access to high LTV lending impacts not only first time buyers but also those hoping to move up the property ladder. The research also shows that limited access to high LTV lending across all mortgages heightens the challenge for first time buyers in fulfilling their ambitions of home ownership. The study suggest that already a lack of housing supply is crippling the first time buyer market and making it harder for people hoping to move up the property ladder also means that typical first time buyer properties are not being freed up as often as they should. The price gap between 75% and 95% LTV mortgages has narrowed since the start of the year as a result of lower interest rates over the last few months. In January 2015 the price differential was 71% but has since fallen to 69%. However, this remains very high and means those who are unable to save for a larger deposit are faced with charges 69% higher than those who have access to a 25% deposit. On an average first time buyer property of £159,053, those with a 25% deposit pay a monthly fixed payment of just £500, compared to £846 for those with a 5% deposit, a difference of £346. Similarly, the fixed term cost for buyers with a 95% LTV mortgage is £20,307 and just £12,000 for those with a 75% LTV mortgage, a difference of £8,307 or 69%. The report says that as further evidence of the dominance of low LTV lending, the number of products available for those with larger deposits grew faster than the number of new high LTV products; the number of available products at 75% and 80% LTV rose by 280 and 200 respectively in the year to August… Continue reading →

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