First time buyer hopefuls now expect to save an average of £51,923 to put towards the deposit on their home, according to Aldermore’s latest First Time Buyer Index1. For more than three in five (62%) prospective first time buyers, this is more than they initially expected, and they’re saving £21,664 extra on average than they originally planned to.
FTBs prolonging journey to homeownership by stashing cash in current accounts
On average prospective FTBs plan to allocate up to 30% of their take-home pay for their monthly mortgage payment. However, with average monthly repayments increasing, many people are having to shift expectations of what they can afford. Half of all prospective first time buyers (55%) now expect they will need to buy a cheaper home as a result.
As homebuying becomes more expensive, the usually generous Bank of Mum and Dad has been less financially able to provide support than in previous years, so a greater number of buyers will use their own savings to get on the ladder (67% compared to 62% last year). However, a concerning number of first time buyers (43%) are keeping at least some of their deposit savings in their current accounts, rather than making the most of higher-interest savings accounts that are available. By moving the average deposit (£51,923) into a savings account which pays on average 4.80%2, over the course of 12 months, the interest earned would be enough to pay for first time buyers’ solicitor fees, broker fees and conveyancing/valuation fees combined3.
Obstacles to FTBs’ home ownership dreams
A fifth of homebuying hopefuls (20%) perceive inflation and high living costs as the biggest barriers to realising their dream, while a similar proportion (19%) simply found it hard to find an affordable property. The number of prospective FTBs who found the homebuying process stressful increased compared to the year before (71% vs 66%).
However, despite these challenges, nearly eight out 10 (79%) agree it’ll be worth the stress once they have gotten their foot on the property ladder, as the general consensus is that doing so will be a good investment for their future (79%). A similar proportion (77%) see owning a home as a significant life goal.
Jon Cooper, director of mortgages at Aldermore, said:
“The economic environment has made home ownership a lot more difficult. Larger deposit requirements, higher interest rates and affordability challenges are squeezing the market. Prospective buyers have responded by purchasing cheaper homes to offset higher mortgage repayments and, reassuringly, many still view home ownership as a major life goal as well as a good investment.
“Looking ahead, we must strive to better support first time buyers, so that more of them can gain a foothold on the property ladder. Fundamentally, while it’s positive that there were steps taken in the Autumn Budget to get Britain building, more new and affordable homes need to be built to help ease increasing house prices for the next generation of buyers.”
**Ends**
Notes to editors
1Research conducted, on behalf of Aldermore bank, by Opinium between 17th – 28th June 2024, among 2,000 Prospective First Time Buyers and 500 Actual First Time Buyers.
2Money.co.uk, Savings Accounts
3A savings account paying 4.80% interest on savings worth £51,923 would earn £2,516 in interest over 12 months. This would be enough to cover solicitor fees, broker fees and conveyancing fees/valuation fees based on the averages fees as calculated by Aldermore Bank and Opinium:
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