First time buyers now need to find on average a deposit of £32,000 to secure a mortgage, research from moneysupermarket.com has revealed.
With house prices continuing to fall, moneysupermarket.com has found that 13 per cent of 18 to 34 year olds are now thinking the time is right to buy their first home.
However, the figures show that only a quarter of buyers have already saved their deposit, which means many first time buyers are considering taking out a loan to pay the deposit.
As the number of mortgage deals being handed out has fallen by 60 per cent in the last 12 months, to secure many leading mortgage deals, buyers now need a deposit of 25 per cent.
For many this means they will have to continue saving, but 16 per cent of first time buyers said they would take out a loan to cover the cost of the deposit.
Reacting to this news, Louise Cuming, head of mortgages at moneysupermarket.com, said: “Taking out a loan to pay for a mortgage deposit is a dangerous move, and must be avoided even if it means you have to delay buying your first home.
“Anyone who takes a loan is effectively taking out a 100 per cent mortgage through the back door. Not only will the mortgage lender decline the application if it discovers this is the source of the deposit but it is also a huge risk to the borrower “she adds, “Your monthly outgoings will be higher which means there is a greater chance of you finding yourself unable to keep up with repayments.”
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