As the cost of buying a property in the UK soars, aspiring homeowners are taking drastic measures to save for a deposit.
Around 22% of first-time buyers moved back into their parents’ house to save up a big enough deposit, a survey from Which? Mortgage Advisers showed – while cutting back on spending, working more hours and even selling off belongings were also popular tactics.
Below, we explain how first-time buyers are getting on the property ladder and the steps you can take if you’re trying to save for a deposit of your own.
First-time buyers spend years saving
When we surveyed over 700 first-time buyers in December 2017, we found that nearly half (46%) were putting down a deposit of 10%. If you take the current Office for National Statistics (ONS) average property price of £237,794, this equates to £23,000 in cash – even without factoring in the other costs of buying a house.
On average, first-time buyers spend between three and four years actively building up a deposit, our survey showed. For many, however, the journey is much longer – a quarter spend more than five years saving.
The secret to saving a deposit
The savings needed to buy a home are immense, so how are people managing it? The Which? Mortgage Advisers survey found that first-time buyers were prepared to significantly change their lifestyle to boost their savings.
Cutting back on spending was the most popular option, with 41% of aspiring buyers going out less often and a further 41% cutting out non-essentials. Holidays were also curtailed, with 38% spending less on travel.
Some people were creative with their fundraising, with 19% selling belongings, while a financially savvy 24% shopped around for the best banking deals.
But first-time buyers also took more extreme measures to save – 37% worked overtime or longer hours, while 22% moved in with family to save on rental payments.
First-time buyers helped by family
While 62% of respondents saved every month to be able to afford a deposit, savings alone weren’t enough for many first-time buyers.
One in three (31%) people were helped along by inheriting money, while a similar number (29%) received help from a relative or friend.
If your parents want to help you buy a home but can’t give you cash towards your deposit, there are other options.
With a guarantor mortgage, the parent offers their own home as security against their child’s loan, allowing them to borrow up to 100% of the property value.
A family offset mortgage, meanwhile, allows parents to put their savings in an account to offset against the child’s mortgage, with the money returned once the property is paid off.
Buy a property sooner rather than later
If you’re struggling to save up a deposit, there is help available.
David Blake, principal mortgage adviser at Which? Mortgage Advisers, says: ‘For many, the prospect of saving a deposit for a first home can be daunting, unrealistic and even downright depressing.
‘However, there are various options out there for first-time buyers, from Help to Buy Isas to equity loans, and even shared ownership. Consider speaking to an independent expert who can offer tailored advice.’
If you’re looking to buy a property, options to consider include:
- Help to Buy Isa or lifetime Isa – with either of these accounts, the government will give you a bonus on top of your savings if you buy a property
- Shared ownership – where you buy 25%-75% of a property and pay rent on the rest
- Help to Buy equity loans – where the government lends you up to 20% of the property value (40% in London) so you can buy with a 5% deposit
- Affordable housing schemes in your area.
To find out how soon you’ll be ready to buy in your chosen area, check out our mortgage deposit affordability calculator: