View more on these topics

First time buyer deposit to hit £32,000 by 2011, says Egg

A new report by digital bank Egg finds that deposits will equal 85% of first time buyer&#39s income by 2011.

Saving for a first home will reach crisis level in the in South East and London, with average deposits hitting £74,000 in a decade. Britons saving for their first home likely to reach age 36 before they can afford to buy.

Andy Deller, head of banking and insurance at Egg, says: “Today&#39s first time buyers may be struggling to buy their new home, but the outlook is even worse for the next generation. Rising house prices, combined with young people&#39s inability to borrow significantly more, will lead to soaring deposit levels, making it even harder to get a foot onto the property ladder.”

The only solution open to most young people is to start saving as early as possible and to be realistic in how much they can put away each month. By doing so they have a better chance of amassing a healthy saving pot and avoiding disappointment further down the line.”

The average deposit for a new homeowner is estimated to rise by 6.8% year on year over the next decade to reach £32,000 in 2011 – 85% of the £41,000 income a first time buyer can expect to earn.

However, according to the &#39Saving To Get A Foot On The Property Ladder&#39 report, prospective homeowners not willing to put off homeownership face having to make severe sacrifices. A quarter of young people will be prepared to put off marriage and a third willing to delay starting a family in order to save the money for a deposit.

Although today&#39s first time buyers are already stretching their finances further than at any other time in the last 25 years, with many struggling to find an average deposit of £18,0331 – 70% of their £25,357 annual income – few future buyers are saving enough, early enough.

Currently, only a third (32%) of the 18-25 year olds questioned have started to save for their deposit, putting away an average £164 a month. Egg warns that by these standards, homeowners will continually be playing &#39catch up&#39. So that by 2011, only £21,000 could be saved, by which time, with house price inflation, first time buyers will still be £11,000 short of the predicted £32,000 deposit needed.

Futurologists predict that Londoners will be the worst affected, needing to find £74,000 for a deposit on the average house price of £351,000 in 2011. If saving at predicted average rates Londoners will be 40 years old before they can afford to buy.

Recommended

Natwest Home Insurance launches £100,000 competition

With the average mortgage now £100,000, NatWest Home Insurance has launched a competition which will enable the winner to pay up to £100,000 off their mortgage. All people have to do to enter is to ask for a home insurance quote or give NatWest their insurance renewal date before the end of September. If the […]

Demand still weak as global recovery remains elusive, says CBI

The weak global economy continues to hold back demand for manufactured goods with domestic and export orders both poor, claims a new CBI survey. In the latest monthly Industrial Trends Survey 40% of respondents said orders were below normal while 16% said they were they were above. The balance of minus 24 is the same […]

Strong growth in building society lending

Building society gross advances amounted to £3,551 million in July, increasing from £2,812 million in June, the Building Societies Association says. Net advances were £1,224 million in July, up from £1,061 million in June. Approvals (loans agreed, but not yet made) increased to £3,681 million in July, from £3,212 million in June. In the savings […]

House price inflation falls, says Hometrack

Hometrack&#39s monthly national survey for August 2002 has revealed that house price inflation has fallen to 0.7%, the lowest rate since January this year. But this still represents 8 times the current monthly retail price inflation rate. The survey has also revealed that house price rises are averaging 0.7%. Following a 2.6% rise in May, […]

Newsletter

News and expert analysis straight to your inbox

Sign up