The rising cost of living is making it extremely difficult for first time buyers to scrape together enough savings for a deposit, Sainsbury's Bank has said.
The amount that people save has fallen since the credit crisis first struck last summer, and this is proving particularly problematic for first time buyers that are trying desperately to save enough for a deposit to get their foot on the property ladder.
The average age of a first time buyer is 29, and research from Sainsbury's Bank has found that 16 per cent of people aged 25 to 34 are saving less than they were a year ago, primarily due to the rising cost of living.
Just nine per cent of this group are saving more than they were a year ago, and 36 per cent of their peers admit that in the current financial climate they are unable to afford to save anything at all.
Government figures released yesterday reveal that some foods are rising in price at four times the rate of inflation, and consumers are also having to cope with higher transport and energy costs
The first time buyer mortgage
market is not what it was a year ago either, as lenders react to the tighter credit conditions by withdrawing much of their range and requiring a deposit.
Whereas a year ago first time buyers could borrow more than 100 per cent of the property's value, now they are having to find at least five per cent for a deposit; in some cases they now need 25 per cent to get the most competitive deals.
Melanie Bien, director of mortgage broker Savills Private Finance, said that "Lenders are moving away from riskier customers who tend to have high loan to value."
In light of this, people in the first time buyer age bracket should be saving more, but they are actually saving less, said Neil Cameron, savings manager at Sainsbury's Finance. "Those people saving for a deposit on a property should review any savings account
they are using for this and make sure that they have one that pays a consistently attractive rate that does not penalise you for withdrawing your money should you need to." he said.
Ms Bien added: "First time buyers tend to have smaller deposits and have not benefited from years of house price rises." she said. "Unless they have parents who can help, they are stuck."
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