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Average deposit required for a mortgage is 10 times higher than it was 20 years ago, making it difficult for people to buy a house
Prospective homebuyers are having to stump up a deposit 10 times the size of that needed 20 years ago, despite incomes less than tripling during the same period.
Since 1990 the average housing deposit has risen from an average of £6,793 to a staggering £65,924. During the two decades, house prices have more than quadrupled, while the average household income has grown by just two and a half times, according to research from bank and mortgage lender First Direct.
A combination of a rise in house prices and a reduction in the amount banks are willing to lend has meant that those looking to buy a house last year would have found it more difficult financially than at any other time in the last 20 years.
Those who grabbed the opportunity to get on the housing ladder in 1995 and 1996, on the other hand, will have found it easier than at any other time over the last 20 years, with house prices at that time closer to three and a half times income and an average 10% deposit required to buy a home. Now buyers are typically stumping up 27% of the property price.
"Much has been made of rising house prices, but the average deposit needed in the first place has actually risen more than twice as fast as house prices and almost four times as fast as income," said Bruno Genovese of First Direct. "This is why we are seeing first time buyers getting older, with more and more people struggling to get on the property ladder."
Alice Murphy, 27, and her boyfriend Michael have been saving for years for a deposit. The couple rent a one bedroom flat in Reading but desperately want to buy in London, where Alice works. "We have a few thousand pounds that we have got from inheritances and from saving, which, if we were anywhere else other than the south east, would be enough to buy somewhere," she said. "But prices in the areas we are looking in just seem to be going up and up and mortgages harder to get."
The couple are considering getting a "very big mortgage" and buying a property where they could take in a lodger to help pay for the loan. "It's hard to know what to do. It sounds awful but I have friends who are just waiting for older relatives to die so that they can inherit the money to enable them to buy somewhere to live," she said.
Many prospective buyers who are currently renting are now suffering the double whammy of saving bigger amounts for a deposit while seeing their rent increase. Last month, rents rose by the fastest amount in a year, bringing the average UK rent to £713 a month or just over £1,000 in the capital. The figures, released by lettings agent network LSL properties, also showed the extent to which tenants are struggling to pay their rent. Tenant arrears increased last month for the first time since April, with almost 11% of all UK rent unpaid or late by the end of August.
Separate research fromthe Halifax indicates that those living outside London and commuting into the capital easily offset the cost of the train by the amount they save in buying a home.
House prices within a travelling distance of an hour from the outskirts of London are on average £375,000 (60%) lower than in the centre of the city, while the average annual cost of a 60-minute commute is £4,400. Examples of commuters paying more to live out of the capital are rare, said the bank. Those in Beaconsfield number amongst them, however, with commuters paying a higher average house price than central London (£757,097), while also having to pay an annual train fare of £2,972 to get to work.
Lisa Bachelor
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