On average it takes 23 years for savers to raise enough money to buy a home. At the same time, 35% of renters are more than likely to have no savings at all.
Figures from the Scottish Widows Savings and Investment Report show that the average private renters saved £2,180 in the last 12 months, meaning it would take around 23 years to save the average deposit of £50,845. Even the average first time buyer would have to save for 13 years to raise the typical £27,984 deposit.
Property ownership is fast becoming a distant dream for many would-be homeowners. The figures suggest that many renters are prepared to give up on the idea of owning a home with only 29% of those surveyed actually putting money into a savings account for a home deposit.
With the cost of living increasing and rent prices reaching record highs, it’s no surprise that a massive 72% of renters say they can’t afford to put money aside for a house deposit. Only one in five (21%) are saving for the short term.
One in six believe their savings would last less than a month if they were unable to rent and half say they would only be able to support themselves for a couple of months or less.
Iain McGowan, Head of Savings and Investments at Scottish Widows said:
“We live in a society where many strive to own their own homes but, for many people facing high rent and increasing living costs, this isn’t going to be achievable. Whilst this is concerning, what is most worrying is that over a third of renters have no savings at all and are leaving themselves vulnerable in the short and long terms.
“The importance of saving goes much further than getting on the property ladder as a healthy savings pot can provide an invaluable buffer for the unexpected or tough times. Whilst owning a property is seen for many as something to work towards, we need to ensure that people are able to manage their out-goings, whether rent or a mortgage, and create that safety-net for unexpected bumps in the road. There is no doubt that adding to a savings pot can be difficult in challenging economic times but it is this that we should all be aiming for.”
But despite this, the number of first time buyers has increased. Further research shows that the number of first-time buyers increased by 3% in February making it the best start to the year since 2008.
Figures from the Council of Mortgage Lenders show that the UK housing market is starting to pick up again after years of stagnation. The first-time buyer sector was up by 17% in February compared to the same time last year.
If you’re a first-time buyer ready to step onto the property ladder, here are a few top tips:
Share the costs
One way of dramatically cutting the cost of home ownership is by buying with friends or a partner. If having putting the funds in place to buy your dream home proves to be too big a financial burden you could consider this option, meaning you will each have less of a deposit to pay.
Alternatively, you could opt for shared ownership or a shared equity scheme. This allows you to buy a portion of a property, which is usually 25%-75% while renting back the rest from the developer or housing association. This also means that you don’t have to raise such a large deposit. On the downside you do not own the whole property so you might be restricted with what you can do with it.
Because the housing affordability crisis has reached worrying levels, the government has stepped in and introduced a number of schemes to make it easier for people to buy homes. These include the FirstBuy or NewBuy schemes.
FirstBuy is an equity loan scheme which works in partnership with developers in England. The way it works is simple and the developer provides an equity loan which is usually around 20% and you pay a deposit of 5% leaving you to arrange a mortgage for the remaining 75%.
NewBuy is a new, government-endorsed scheme that allows developers to offer their homes with a 95% mortgage. The scheme is perfect for people who can afford monthly mortgage repayments but are finding it difficult raising a deposit.