The average cost of a mortgage deposit on a first home has climbed by 54% in the last decade, pushing homeownership further out of reach for the nation’s first-time buyers, research from Stipendium has revealed.
Stipendium analysed the current cost facing first-time buyers when it comes to a mortgage deposit and how this has changed over the last five and 10 years.
The research shows that a decade ago, the average first-time buyer was required to place a deposit of 17% in order to secure their first home.
With the average first-time buyer house price at the time sitting at £138,973, this equated to a deposit of £23,625 – £29,684 once adjusted for inflation.
Fast forward five years and the level of deposit required from the average FTB had fallen, albeit marginally, to 16%.
However, with the average first home costing £181,440, the nation’s FTBs were looking at a mortgage deposit to the tune of £29,030 – £32,495 once adjusting for inflation.
This means that the initial financial hurdle of securing a first home climbed by 9% in five years, an increase of just £2,811.
Today, however, Britain’s booming housing market has pushed this cost far higher.
The average first-time buyer is now required to place a deposit of 20% and with the average first home coming in at £227,846, this equates to a sizeable £45,569.
That’s a 40% increase in the last five years alone and a 54% increase in the last decade even after adjusting for inflation.
Christina Melling, CEO of Stipendium, said: “Record house price growth means that the initial requirement of a mortgage deposit has climbed substantially over the last decade and the vast majority of this increase has been seen in the last five years alone.
“While this increase will have been felt by homebuyers at all levels of the market, it’s been particularly hard on first-time buyers who are just starting out on their journey to homeownership and who won’t have the financial backing of a previous property in order to cover their mortgage deposit costs.
“It really does beg the question as to where it will stop? We’ve only seen one notable market realignment in the last two decades and house prices have since surpassed previous peaks to reach new highs, which has severely reduced the chance to buy for many aspirational homeowners.”
Stuart Wilson, corporate marketing director, more2life. added: “For years younger generations have often relied on the ‘bank of mum and dad’ to help them jump on the housing ladder, and with news today that deposits have rocketed up by over 50% in the last decade, it will be more important than ever for older homeowners to have access to a range of tools to help their loved ones buy their first home.
“One particular ‘multitool’ in the financial toolkit is equity release, which saw older homeowners release a record amount released 2021.
“The UK House Price Index shows that the average UK house price has risen by nearly 10% in the past year alone, meaning that the bank of mum and dad – or gran and grandad – has access to a growing pool of equity which they can gift to family to help them gather a deposit.
“With more2life research also showing a 116% year on year increase in the number of people using equity release for property purchases in 2021, it is clearly an option which is quickly growing in popularity.”
