Family Finance Weblog

If you take the average deposit being demanded of first time house buyers and add to that the cost of paying the first years’ mortgage repayments, then the result works out at 111% of the borrowers’ average salary. A year ago, the figure was 61% and even that was a lot higher than the long term average of 38%.

This huge burden is the result of the mortgage lenders demanding much higher deposits. On average lenders are demanding deposits of 24% of the purchase price of the property. So on average house price of £128,000 this means a deposit of around £30,000.

And once the first years mortgage payments are added in, the total is more than the average first time buyers’ gross annual income of £33,000. It is true that once you have one, mortgages are cheaper because both interest rates have fallen and house prices are down 20%. However, the increased deposits mean that only those who have been saving for years will be able to start on the housing ladder.

This must increase the popularity of shared equity deals where the first time buyer buys a percentage of the house and the developer or finance house, owns the remaining percentage of the house. In most of these schemes, the “owner” has the right to increase the percentage of the house they own by buying more of the house as their finances allow.

For others, the only option is renting a house or an extended stay with relatives.