Prospective homebuyers, planning to purchase a property within the next two years, are confronted with an £11,500 increase in required deposit savings, according to new research from Mortgage Advice Bureau.
On average, potential buyers had expected to save £36,118 for their deposit. However, due to recent economic turbulence, nearly two-thirds (62%) have found this figure to increase, expecting to need an additional £11,500.
This unexpected surge in deposit requirements has compelled 15% of potential buyers to put their homebuying plans on hold.
The growth in deposit size is linked to various economic factors that have limited borrowing capacities, coupled with rising inflation. The challenge of saving for a larger deposit has become one of the most formidable barriers to homeownership, troubling almost a third (32%) of prospective homebuyers.
Several elements are influencing deposit sizes and homebuying plans. A quarter of those surveyed said that the higher cost of borrowing necessitated increased savings, 11% desired a lower loan-to-value (LTV), and nearly 8% will now resort to familial financial help, often known as the “Bank of Mum and Dad.”
Ben Thompson, deputy CEO at Mortgage Advice Bureau, said: “There are many challenges for prospective buyers to overcome before they get the keys in their hands, and right now, they’re coming from all sides.
“Economic volatility has seen prospective buyers battle high inflation, pushing prices up and limiting the amount they can save.
“Meanwhile, higher interest rates have lowered the amount they can borrow, meaning bigger deposits are needed.
“This has led to many prospective buyers having to put more away than they had initially planned.”
Thompson also highlighted some potential positives, such as benefiting from higher interest rates on savings and utilising government schemes like the Lifetime ISA. He recommended consulting a broker for assistance in becoming mortgage-ready.
The research further uncovered that future buyers are making marked cutbacks to manage their deposit savings, with 24% trimming social outings and 26% restricting luxuries.
