First time homebuyers saving for years
23 April 2003
The average homebuyer puts down a massive 24 per cent of the total purchase price as deposit.
A survey by the Council of Mortgage Lenders found that first time buyers save almost a quarter of the price of their house as deposit.
Research for the Abbey National, conducted by BMRB shows that the vast majority of first time buyers (61 per cent) choose to use savings to fund deposits. Others methods of financing the deposit include borrowing from a bank (eight per cent), borrowing from parents (five per cent) and asking parents to pay (five per cent).
Of those surveyed, more than a quarter (27 per cent) of 20-30 year olds stated that it took over four years to save for their deposit.
The Abbey National points out that the sharp rise in house prices in recent years means that young people are having to save for longer to accumulate the five or 10 per cent deposit for a first home.
Over a quarter of Scots (26 per cent) saved for less than a year, while 35 per cent of Londoners were forced to save for more than four years for their home. This probably reflects the vast differences between house prices in the two regions.
Young people today are also more likely to require help from their parents for a deposit. 65 per cent of 51-60 year olds paid for their first house deposit with their savings. In contrast, 53 per cent of 20-30 year olds now save for their deposit themselves, with 9 per cent asking for a loan from their parents and 12 per cent relying on their parents to pay the deposit.
Saving for a house deposit is difficult according to 84 per cent of respondents, and 57 per cent think it is very difficult. Not surprisingly given the high house prices and length of time needed to save for a deposit, 91 per cent of Londoners think it is difficult compared with only 77 per cent of Scots.
Alexia Kilby, Abbey National's Head of Savings, commented, 'It is interesting that although house prices have risen, first time buyers are still putting down a large deposit on their first home and prefer to save up to do so.'
'As this can take a few years it's important to choose a savings account which pays a good rate of interest and helps you to keep saving each month.'
While they are saving for their first home, potential buyers are prepared to make sacrifices to achieve their goals. The majority of people, (57 per cent), forego holidays and almost as many, (56 per cent), sacrifice going out as often. People aged 20-30 are the least likely to have sacrificed going out, (45 per cent), but the most likely to give up a car in order to save for a house deposit.