Those hoping to get a mortgage allowing them to purchase their first property will have to save for, on average, eight years, according to a report from the Yorkshire Building Society. The report took into account average first home prices (£131,250), average rates of interest on savings accounts (1.25%) and the average amount that those looking to buy a house would save each month (£248).
Of course, the rates vary from region to region, but it paints a rather bleak picture for those who are only just considering investing in their first home. The financial crisis has hit first time buyers particularly hard, as banks have stopped giving out loans to any customers they think might present even a small risk. This means that on top of the difficulty in getting a deposit together, they may be denied a mortgage even with one.
Chris Smith from the Yorkshire Building Society brings up another difficulty that first time buyers face: “In the last five years mortgage activity in general has more than halved, and today’s first time buyers are facing a squeeze on incomes and pay rates that are not keeping pace with inflation.” The banks know this too, which is another reason they aren’t keen to lend. They don’t want to give out loans or mortgages that people could end up defaulting on in a few years.
Despite these difficulties, the number of first time buyers in the mortgage market has actually increased proportionally, showing that people are willing to make the extra effort and push to get their first home. According to Chris Smith, this is good news: “it’s encouraging to see the proportion of first time buyers has actually begun to increase in this period and more people are seeing home purchase as a prudent financial decision.”
If the housing market, particularly the first time buyer’s market, continues to increase, it could make a big difference to the overall economic picture.