Prospective buyers planning to purchase a home in the next 24 months are aiming to save over £11,500 more for their deposit, according to new research from Mortgage Advice Bureau.
While the challenge of saving for a deposit isn’t new, the size of prospective buyers’ deposits is having to increase. This is due to economic factors limiting how much people can borrow.
On average, prospective buyers said they thought they would need to save £36,118 for their deposit. However, for three in five (62%), this has increased, with future homeowners expecting to need an additional £11,500 in light of recent economic uncertainty.
This is putting plans on ice for some, with 15% of prospective buyers delaying their plans to buy altogether. In fact, saving for a deposit remains one of the biggest barriers to homeownership for almost a third (32%) of prospective homebuyers.
There are many factors that have impacted people’s homebuying plans and deposit sizes. For a quarter (25%), the higher cost of borrowing means they will have to save more, while one in 10 (11%) say the amount they are needing to save has increased due to them wanting a lower loan to value (LTV). Meanwhile, almost one in 10 (8%) will now turn to the Bank of Mum and Dad for help.
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.
“Nevertheless, there are some positives that can be taken from this. For those saving for a mortgage, it’s time to take advantage of higher interest rates on savings, with fixed rate accounts in particular offering good rates. Government initiatives, like the Lifetime ISA and Help to Buy ISA (for those who had an account before the scheme closed) can also help. Whatever stage you are at, it’s worth talking to a broker who can help you get mortgage ready.”
The research from Mortgage Advice Bureau also found that prospective buyers are making significant cutbacks to try and be able to afford their dream home, with a quarter (24%) having cut back on socialising, and 26% on luxuries.
