First-time buyers forking out for larger deposits in 2020

First-time buyers are putting down larger deposits in order to get onto the property ladder, according to data from Mortgage Advice Bureau (MAB).

In October, 36% of first-time buyers were committing deposits up to 20%, while one in four (25%) were able to put down a 30% deposit or above in order to get onto the property ladder – without using a government scheme such as Help to Buy, MAB noted.

The data showed this number had risen since January, when only 18% of first-time buyers were putting down 30% deposits or above.

MAB estimated that first-time buyers would “generally” need a deposit of anywhere between 5% and 20% of the property purchase price – with 10% being the figure that most first-time buyers normally aim for.

The data showed that in January, most first-time buyers were meeting this, with 26% putting down deposits up to 10% of the value of the property. In October, just 5% of first-time buyers put down a deposit up to 10%.

MAB head of lending, Brian Murphy, offered his advice to first-time buyers and suggested the use of government schemes.

“Despite the pandemic, the government still offer different Help to Buy schemes which could help boost your deposit savings,” Murphy said. “If you are a first-time buyer and interested in a new build home, through the Help to Buy Equity Loan, the government will lend you up to 20% of the purchase price.

“Prospective buyers should note that this scheme changes significantly on 31 March 2021, but a new one will begin 1 April 2021, which is only available to first-time buyers and includes a number of regional price caps.

“For first-time buyers, the Lifetime ISA acts as a savings account with a few added benefits. You can pay up to £4,000 each year into your account and receive a 25% bonus (£1,000 maximum) from the government.”

Murphy also suggesting getting the expert advice of a mortgage adviser to get onto the property ladder.

They can offer you the relevant guidance on mortgage products available and how this in turn will affect your deposit savings, as well as help you with budgeting and affordability,” he said.

“An adviser can help to explain all the options available to you and will look at your income and outgoings to establish how much you can afford to borrow and how much you can afford to save. Saving for a deposit, applying for a mortgage and buying a house are all instances which are very unique to an individual’s situation, so speaking with an expert will ensure you receive appropriate advice.”

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