21% of prospective buyers aged 18-34 say that, following this month’s interest rate cut, they will now find it difficult to reach their deposit goal and therefore delay getting on the housing ladder, according to research by MoneySuperMarket.
Its research found that 18-34 year olds currently saving for a deposit estimate they need an average of £24,880 to buy their first home, a 14% increase from last year’s estimated amount of £21,885. Most asked had so far only saved less than half of their desired total (£9,632), taking them an average of seven years if saving alone and three years if saving with a partner.
MoneySuperMarket said that, given the average UK house price is £211,230, first time buyers will need on average a £21,000 deposit (based on a 90% LTV mortgage), meaning most prospective homeowners still have a considerable amount of money to save before they can apply for a mortgage.
All prospective buyers saving alone think it will take another eight years to reach the full amount they need for a deposit, and those saving with a partner think it will take three and half years more. Consequently, the average age UK house hunters estimate they will be able to take their first step onto the property ladder is now 37 years old.
Those looking to buy in the East of England expect they will be 42 before they buy, while those in the North West expect to be 38. Those in the South East are more optimistic and think they will be 36 when they get on the property ladder
However, overall 35% do not intend to buy their own home.
Kevin Mountford, banking spokesperson at MoneySuperMarket, said: “The Bank of England dealt a blow to savers when cutting interest rates to 0.25% this month and, as a result, first time buyers now face the prospect of having to save for longer due to dwindling savings rates. This is coupled with the general rise in house prices seen during the first six months of the year, even though prices dropped slightly in July. However, it shouldn’t be all doom and gloom, as there are still opportunities to save if you look for them and putting the most you can afford away each month will also help.
“Savers shouldn’t settle for a miserly rate if there’s a better one to be found elsewhere, whether that’s via ISAs, bonds, peer-to-peer lending, or current accounts. The Help to Buy ISA is designed specifically to help those trying to get on the housing ladder and, when it comes into force next year, the Lifetime ISA can be put towards a property purchase. First time buyers should make the most of these initiatives.”