Glimmer of hope for first-time buyers

The Government will launch an independent review of access to mortgage finance for first-time buyers, with the aim of making it easier for this group by widening access to low-cost, low-deposit finance such as 95 per cent mortgages.

Currently, soaring house prices, stringent mortgage lending restrictions and high deposit requirements are hampering the ambition of many young people who want to own their own home.

More than half of today’s renters can afford the monthly cost of a mortgage but constraints mean only six per cent could get a typical first-time buyer mortgage.

First-time buyers need to raise a deposit that is 56 per cent higher than 10 years ago, while average salaries have increased by just over 35 per cent in that same time

The currently monthly mortgage payment for someone with a 10 per cent deposit is £901, and with a five per cent deposit it is £988. The equivalent monthly rental payment is £887, slightly lower because rising interest rates have pushed up typical mortgage payments.

To get approved for a mortgage from a typical lender right now a person buying on their own needs an average deposit of £74,402 for a first-time buyer home. This figure is more than double that of 10 years ago.

So if someone was buying on their own and could afford to save £100 a month towards a deposit, it would take them 62 years to save the £74,000 they need to buy a typical first-time buyer home.

Tim Bannister, Rightmove’s director of property science, said: “If a review of the mortgage market could help with the challenge of needing such a big deposit then it would be greatly welcomed by those who are able to demonstrate that they can afford monthly payments.”