Pandemic deposit levels fenced out 44% of first-time buyers

Pandemic deposit levels fenced out 44% of first-time buyers

Nearly half (44 per cent) of the UK’s first-time buyers delayed buying their first home last year due to the pandemic-induced rise in deposit requirements.

Since 2019, concerns over deposit amounts among younger generations have risen 30 per cent, according to research from Santander.

Last year, these first-time buyers put down an average deposit of £57,278, compared with £46,449 in 2019. Back in January, Halifax calculated a deposit rise of more than 23 per cent in 2020.

“Many first time buyers couldn’t access the mortgage market from mid-last year until this April, as lower deposit mortgage deals were pulled from the market,” Will Rhind, Habito’s mortgage advice head, told FTAdviser.

Despite Bank of England data suggesting households have continued to deposit significant amounts, adding an additional £16.2bn to their coffers in March alone, younger buyers were still the most harshly impacted by the government’s furlough scheme, unemployment and reduced income during Covid-19.

In its report, Santander also cited new ‘virtual commuter belts’ which have driven up prices in traditionally cheaper areas, as well as the general uncertainty around the future of remote working, which encouraged many younger buyers to stay at home with their parents.

But home ownership remains a priority for this demographic. Nearly two-thirds (63 per cent) of the 12,000 UK adults Santander surveyed said it was their priority last year even if they did not end up buying.

The high street bank made a series of suggestions to help first time buyers reach a status of home ownership.

These included a government scheme for key workers in search of discounted deposits, a stamp duty for over 55s looking to downsize, a review of the loan to income rules on borrowing, and a commitment to match conversions with local amenities so properties hold their resale value.

The UK government has already introduced a series of schemes designed to help first-time buyers. But its Help to Buy scheme, introduced in 2013, has since been proven by the National Audit Office to have pushed up house prices.

Earlier this month, the government introduced the First Homes initiative offering a 30-50 per cent discount on new build houses across England.

However, there is already talk amongst the industry that demand for these reduced homes could outweigh supply and once again drive up house prices.

“Structural issues clearly remain within the UK housing market, ones that we will only resolve with lenders, builders, regulators and government working together in unison,” said Tony Davis, Metro Bank’s mortgage head.

But with the re-introduction of government-backed 95 per cent mortgages, and Nationwide’s increase in its income multiple of up to five times, Habito’s Rhind thinks there is cause for hope. “We could see increased demand again for first-time flats or starter properties,” he said.

He also cited the Lifetime Isa, which offers a 25 per cent top-up on any savings for first-time buyers.

“This can save months, even a year’s worth of saving, to get that deposit sooner,” he added.