More first time buyers are taking on second jobs, personal loans or sharing payments with friends as they struggle to get on the property ladder, according to new research.
The study, by Santander Mortgages, highlighted the difficulties many consumers are now facing as they try to scrape together a deposit for their first home.
With average housing deposits reaching £37,375 – 17% of overall property value – a third of all non-homeowners said they believed they’d never own a property.
However, one in four current non-homeowners said they were hoping to buy within the next five years.
Second jobs and extra debt
Just over a quarter (28%) of hopeful first time buyers say they will take on second jobs or work overtime to secure the deposit they need.
Meanwhile, 27% said they were prepared to take out a personal loan to help raise the money.
Home buying trends
This highlights a change in buying trends over the last decade: Of current homeowners, who purchased their properties an average of 12.5 years ago, just 5% relied on overtime or a second job to raise their deposit.
Only 4% had to take out a loan for the purpose.
Some things haven’t changed. Saving remains the most popular way of funding a deposit, with 54% of those questioned saying this was the method they’d use.
However, the proportion of potential buyers relying on inheritance money has almost doubled, moving from 8% for current homeowners to 14% for aspiring first time buyers.
Some 7% of respondents said they’d rent out a spare room to raise the deposit cash – and 6% said they’d share the deposit payment with friends.
Help for first time buyers
If you’re a parent trying to help your child onto the property ladder, follow these Which? tips:
- Be clear: Make your child aware whether you are making a gift, a loan (with or without interest) or an investment.
- Think of your child: Use your knowledge of your child and their circumstances to establish the best way to help them, such as with a guarantor mortgage or by remortgaging.
- Go legal: See a solicitor and get a legally binding agreement drawn up. To safeguard a loan or investment, make sure it stipulates the nature of any arrangement.
- Share ownership: Try to ensure that you are named on the deeds. If you do take on a stake in the property, don’t forget to update your will to reflect what you’d like to happen to that stake upon your death.
- Don’t barge in: Respect your child’s right to privacy and don’t dictate who can and can’t visit your child’s home.
- Be honest: Don’t exaggerate your income to secure a larger mortgage.
- Don’t take things for granted: You shouldn’t rely on your current good relationship with your child – things can go wrong
- Think of yourself: Don’t put yourself in a financially risky predicament by overextending yourself and don’t assume that mortgage interest rates will remain at the same level.
If you are looking for advice, the Which? Group offers an independent mortgage advice service that looks at every mortgage from every available lender. You can also find an independent mortgage adviser using the Unbiased website.