Average Deposit for UK First-Time Home Buyers Is Now £31,500

Feb 16, 2011
Carol Finch

Average UK Deposit for First Time Buyers is £31,500 - Photo by neil2580

According to the CML, the average deposit for UK first-time buyers during Q3 2010 stood at £31,500. The government has called for more help from lenders.

On February 15, 2011, the Council of Mortgage Lenders (CML) and the Building Societies Association took part in a summit called by the government's Housing Minister, Grant Shapps, to discuss issues with first-time home buyers in the UK. CML figures showed that the average deposit needed to get onto the housing ladder at the end of 2010 was £31,500 and that factors such as high prices and a lack of available mortgages prevented 1.4 million households from buying their own homes for the first time.

Why Is it Hard for First-Time Home Buyers to Get a Mortgage?

Although the UK's housing problems are not limited to first-time buyers, the problems identified show that it is still particularly difficult for many people to take their first steps toward property ownership. In the wake of the credit crunch, mortgage availability decreased sharply. In 2007, gross lending in the UK totaled £363 billion; by 2010, this figure dipped to £136 billion.

Lenders set higher standards on loan applications, made fewer mortgages available and asked for higher deposits/LTV ratios, making it much harder for many consumers to get a first-time mortgage. Other factors such as the shortage of new housing stock and rising prices also played a part.

First-Time Buyers Need Almost a Year's Salary as a Deposit

According to the latest figures released by the CML (for Q3 2010), the average first-time buyer will need to save almost a full year's salary (£31,500) to raise enough deposit for a loan. This represents 94% of the average income of those buyers who have purchased first homes and is a significant jump on pre-credit crunch statistics. In Q1 2007, for example, the average deposit was £12,700, representing just 37% of annual income.

Has the Average Age of a First-Time Buyer Changed?

More first-time buyers now use financial help from relatives to raise a deposit. According to the CML statistics, this has kept the average age at 29. But, if you look at the figures for people who are not helped by family or friends, then the average age of a first-time home buyer rises. The CML states that this stands at 31 years for 2010, an increase from 28 years for 2005.

In a BBC News article on the 15th February 2011, "First-time house buyers 'face big bill'", Grant Shapps, the UK Housing Minister claims, however, that "the average age of the first-time buyer with no support from their family is now 37."

Suggested Help for First-Time Buyers

The summit discussed various ways that could be deployed to help first-time buyers in the future. These included shared ownership, developer-led deposit matching, lender risk insurance, discounted mortgage rates and a range of programs that could allow other individuals to back or contribute to mortgages.

According to the CML, however, there is no single "magic bullet" that can cure the situation quickly, and the Building Societies Association also called for a faster housebuilding program to be put in place. If more housing stock is available, then prices are likely to decrease, and the market would flow more freely.

In the interim period, consumers may have to continue to shop around for the best available first-time buyer mortgage rates. It may also be worth investigating ways to speed up the process of saving for a deposit.

Sources: Council of Mortgage Lenders (Problems for first-time buyers); BBC Online (First-time house buyers 'face big bill'). Accessed online 16th February 2011.