First time buyers spending fortune on deposit and mortgage
April 2, 2009
Data from a recent report has suggested that first time buyers are now spending a fortune on their mortgage deposit and their first year of mortgage repayments.
The report claims that first time buyers are spending around 111 percent of their total household income on their mortgage deposit and first year of repayments, and this comes as the deposit required by lenders soars to an average 24 percent, which is the largest amount ever required.
The figures show that first time buyers looking to purchase a property priced at £128,000 would need to put down a whopping deposit of £30,000.
However, officials from Citigroup have said that once mortgage payments are added on to this amount the total comes to far more than the gross income of the average first time buyer, which is recorded at £33,300.
An economist from City Group said: ‘People just cannot afford the deposit, and the need to save for a deposit hits both housing demand and spending,’ said Michael Saunders of Citigroup. ‘A few years ago, first-time buyers would have gone to the Bank of Mum and Dad. But with the equity in their home falling, remortgaging is no longer an option.’
Over the past year buying a house has realistically become more affordable for the average first time buyers, and this is because the base interest rate has plummeted to just 0.5 percent - the lowest in history - and house prices have continued to fall. However, the problem now is that lenders are demanding such high deposits that homeownership is still out of reach for many first time buyers.
An official from the Council of Mortgage Lenders stated: ‘House prices may fall further still, which is one of the reasons lenders require larger deposits. Deposits provide borrowers with protection against falling house prices and negative equity.’
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- Sharp fall in low deposit mortgages According to recent reports there has been a sharp fall in the number of low deposit mortgages that are available on the market, making the situation increasingly difficult for first time buyers who want to
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