First-time buyers are still struggling with increased mortgage deposits, as many are unaware of ways to make the property buying process more affordable, experts have claimed.
While there has been much excitement in the press around predictions that house prices might fall, and reports from Rightmove suggesting the availability of housing stock is slightly increasing, others are still concerned that home purchases are still out of reach for many first-time buyers.
Research by Barrows and Forrester has shown mortgage deposits for first-time buyers have increased by an average of 41 per cent over the past 10 years, after being adjusted for inflation.
The estate and lettings agent found the average 15 per cent mortgage deposit for a first-time buyer has increased by more than £10,000 since 2012, even after being adjusted for inflation.
The end of Help to Buy is a big concern for first-time buyers.Lucy Ellis, JJL Some popular areas have seen enormous increases. For example, first-time buyers looking for properties in Waltham Forest have seen the highest increase.
For a Waltham Forest property, a 15 per cent deposit for a first-time buyer is 79 per cent higher than it was in 2012, after adjusted for inflation.
Table: The areas with the largest increases in the average first-time buyer mortgage deposit since 2012
| Location | 2012 - Average FTB House Price | 2012 - 15% Mortgage Deposit | 2012 - Inflation adjusted 15% Mortgage Deposit | 2022 - Average FTB House Price | 2022 - 15% Mortgage Deposit | Change in 15% Mortgage Deposit |
| Waltham Forest | £219,799 | £32,970 | £38,287 | £457,491 | £68,624 | 79% |
| Barking and Dagenham | £157,770 | £23,665 | £27,482 | £324,058 | £48,609 | 77% |
| Thanet | £122,754 | £18,413 | £21,382 | £246,872 | £37,031 | 73% |
| Hastings | £124,828 | £18,724 | £21,744 | £243,100 | £36,465 | 68% |
| Medway | £134,285 | £20,143 | £23,391 | £256,875 | £38,531 | 65% |
| Bexley | £181,760 | £27,264 | £31,661 | £345,828 | £51,874 | 64% |
| Thurrock | £146,675 | £22,001 | £25,549 | £278,519 | £41,778 | 64% |
| City of Bristol | £161,622 | £24,243 | £28,153 | £305,508 | £45,826 | 63% |
| North Northamptonshire | £114,591 | £17,189 | £19,961 | £215,910 | £32,387 | 62% |
| Dover | £135,646 | £20,347 | £23,628 | £255,563 | £38,334 | 62% |
Source: Barrows and Forrester
Research by Barrows and Forrester showed that Aberdeen, the area of Aberdeenshire, and Inverclyde are the only areas to have had a 15 per cent mortgage deposit for first-time buyers decrease over the last decade.
Managing director of Barrows and Forrester, James Forrester, said: “The outlook is a bleak one for those yet to secure that first foot on the property ladder.
“House prices have soared over the last 10 years, let alone during the pandemic, and so the initial financial hurdle of a mortgage deposit is far, far higher than it was in 2012.
“At the same time, earnings have failed to keep pace, with a sustained period of record low interest rates also making the task of saving a deposit extremely difficult.”
Help-to-buy scheme ending
FTAdviser reported last month that “affordability was seen as the biggest barrier to homeownership” amongst young people, according to a report by SO Resi.
The research also showed that less than one-fifth of young people knew about affordable housing options, as reported by FTAdviser.
The government has some affordable home ownership schemes in place to help first-time buyers in the process of saving for a deposit.
The problem is that first-time buyers are unaware of these schemes. For example, the Help to Buy scheme assists first-time buyers in putting down a deposit.
In the scheme, the government offers an equity loan of up to 20 per cent and 40 per cent for London properties so first-time buyers only need to put down a minimum deposit of 5 per cent.
However, this scheme is due to end on October 31, meaning first-time buyers will have to pay a minimum deposit of 10 to 15 per cent.
The mortgage products available to the first time buyer are changing constantly. iPlace Global chief executive, Simon BathAccording to a recent survey by Fairview New Homes, 73 per cent of first-time buyers are unaware that the Help to Buy scheme closes to new applications in the autumn.
The survey revealed that 70 per cent of first-time buyers do not know what the Help to Buy scheme is.
According to Fairview New Homes, many first-time buyers will have missed out on putting down this reduced minimum deposit.
The end of the Help to Buy scheme will affect the ability of many first-time buyers to afford the increasing cost of a mortgage deposit, according to Lucy Ellis, associate director at JLL’s residential London development team.
She said: "The end of Help to Buy is a big concern for first-time buyers.”
“Once Homes England stop accepting new Help to Buy reservations from the end of October buyers will see their affordability levels slashed significantly.”
Changing mortgage products
The changing nature of schemes and mortgage products available to first-time buyers will greatly affect their ability to plan for a mortgage, according to iPlace Global chief executive Simon Bath.
He said: “The mortgage products available to the first time buyer are changing constantly with new products being introduced and existing products being taken away on a frequent basis during this turbulent time.
“This will therefore have a significant impact on the mortgage deposit planning that first-time buyers need to consider.
“While the last few years have allowed first-time buyers to save funds during the pandemic, the need to visit the Bank of Mum and Dad may be greater now than ever.”
Despite changing mortgage products and the help-to-buy scheme closing for applications at the end of October, there are ways first-time buyers can make obtaining their first property an easier process for both short and long term.
There needs to be either an increase in housing supply and/or a restricted market created. David Hannah, group chairman at Cornerstone TaxFirst-time buyers may be able to reduce their mortgage repayments if they increase the amount of deposit they pay, making a mortgage more affordable in the long-run.
Cornerstone Tax group chair David Hannah said: “If a first-time buyer is able to increase their deposit, then this will improve their chances as it will reduce the borrowed amount and thus their repayments.
“It will also increase their equity in the property, making them more secure against temporary price drops that might put heavily mortgaged buyers into ‘negative equity’.”
Increase in housing supply is needed
While first-time buyers can make individual choices to help their mortgage affordability, market change is needed to decrease the mortgage deposit for those buying for the first time.
Hannah commented: “There needs to be either an increase in housing supply and/or a restricted market created, for example one where first-time buyers and owner occupiers get a six or 12-week priority period over investors to make the deal.”
It is not just first-time buyers feeling the effects of a supply and demand problem in the housing market.
As reported by FTAdviser in August, GetAgent found that an imbalance of supply and demand was causing house price inflation and an average listing price of £308,698 for a property.
Lucy Evans is interning with FTAdviser
