Deposit is the biggest barrier to homeownership

Michael Lloyd

July 31, 2019

Nearly a third (30%) of first-time buyers said raising a deposit was the biggest barrier to getting onto the property ladder, Santander has revealed.

Santander’s First-Time Buyer Study: The Future of the Homeownership Dream found another major barrier (15%) was getting a mortgage based on their income.

Miguel Sard, managing director, Santander Mortgages, said: “It’s clear that while the aspiration to own a home is just as strong as in previous generations, it’s a dream that is looking increasingly out of reach.

“Without change, homeownership in the UK is at risk of becoming the preserve of only the wealthiest young buyers over the next decade.

“This report should be a wake-up call for industry and the government to think more creatively to keep the homeownership dream alive for the next generation of first-time buyers.”

The challenges faced by today’s first-time buyers include house price inflation outstripping wage inflation – 47% compared to 18% in the last 10 years – as well as levels of student debt and the costs of childcare.

The average age of a first-time buyer has increased from 25 to 33 years old in the last two decades, and 40% have already started a family. As a result, the most sought-after first-time buyer property is now a three-bedroom house.

The study, based on a national survey of 5,002 non-homeowners aged 18-40 years, found that while nine in 10 still want to get on the ladder, the reality is that by 2026 just one in four under 34s will achieve that goal.

Buyers’ ability to get onto the property ladder is increasingly dictated by the ‘Bank of Mum and Dad’ and family inheritances.

While industry data shows that 39% of first-time buyers had help from living family, and 10% from an inheritance, 40% of potential first-time buyers were relying on an inheritance to boost their deposit.

But the costs of ‘later life’, such as care, could lead to future financial challenges for those ‘gifting’ wealth as well as those expecting an inheritance.

Aspiring homeowners are underestimating the size of the deposit they need to save.

With the majority of mortgage borrowing limited to 4.5x gross salary, the deposit amount buyers’ in each region said they are looking to save would price individuals, or households relying on a single middle-income, out of every region in the UK.

Two fifths (42%) of potential first-time buyers have saved nothing at all towards their first home. Typically, men have saved twice as much as women, £11,660 compared to £5,620, while one in three men and nearly half of women (48%) have not saved anything.

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