Is a first time buyer deposit crisis about to emerge?

By Graham Vanbergen : When I was 20 years old in 1980 I bought my first home. It was a one-bedroom cottage in the village where my parents lived. I bought it entirely on my own for £16,250 on the wage of a delivery driver for a local food supplier, just after leaving college. It was not unusual to buy a property so young at the time as the average age of a first time buyer (FTB) back then was considerably lower than today. By 1990, 67% of the 25 to 34 age group were homeowners but by the end of 2014 that number had halved.


The criteria for buying my first home were simple. The mortgage required to buy it had to be no greater than three times my income. This was the well known limitation (or three times plus one times if your were a couple buying) for all property buyers at the time. It took just 6 months whilst living with my parents to save the £850 deposit and survey fee. The savings bank, long gone now even paid the legal fees. Bank of mum and dad was not required.


In those days I was earning about £100 a week, half the national average.


Today that same property is worth over £180,000, way out of the reach of a first time buyer of any profession, let alone a delivery driver. Given the same criteria, that delivery driver today would need to earn over £60,000 a year, an equivalent of two and a half times more than the average wage today (for a full time permanent worker).


Hampton International published some research after finding it now takes eleven years and three months for the typical single FTB to buy their average first time home with a typical deposit requirement. This desperate struggle for aspiring young adults is truly depressing. Start saving today and you might be able to pick up your keys in 2029!


In London it takes nearly 18 years for the FTB to save a deposit, the South-East nearly 15 years, the North-East nearly 10 years and so on. The average couple across the nation needs to save for six years and three months, according to the research which, takes into account how much money these first-time buyers may have left over after the usual deductions such as tax, rent, and bills such as food, utilities and transport.


Separate research was reported last August suggesting that people are so aware of struggles facing single buyers that they are willing to stay in a relationship just to get on the property ladder.


The study by mortgage brokers L&C reveals almost two million people are doing exactly that – and the figure is expected to pass that threshold within the next five years.


The consequence is that today’s first time buyers are older, more likely to buy with a partner, and to have dependent children compared with a decade ago, according to new analysis by the Department for Communities and Local Government. This research found that 74 percent of first time buyers were couples, whilst the proportion of FTB households with children had rocketed by 61 percent in just ten years.


The average first time buyer deposit is now a staggering £94,088 in London and a ‘slightly more manageable’ £40,931 in the rest of the country according to a report in FT.Advisor. That report also found that two thirds of FTB’s were in the two highest income bands, and that even then, nearly 30 percent needed additional help from family or friends.


But this story of deposit saving is potentially going to get worse.


Opinium Research, used data from the Office for National Statistics (ONS) House Price Index to work out the average purchase prices and mortgage advances given to first-time buyers in the UK’s 17 key cities over the past 20 years.  Deposits were calculated by deducting the average purchase price in each city from the average mortgage advance in that area.


Opinium forecast future house price growth based on how prices have risen over the past 20 years, and used this to calculate how much future first-time buyers would need to save as a deposit to ensure mortgage payments remain affordable. And what they find is that first time buyers deposits could be set to increase by nearly 60% over the next 10 years.


The average age of the first time buyer in Britain today is already 35 years. Could this be set to get much worse in the decade ahead? The whole country is currently suffering a huge housing crisis. There simply aren’t enough decent, affordable homes. I have asked this question before – what is the government for if it can’t even house its own citizens?