A new report by digital bank Egg finds that deposits will equal 85% of first time buyer's 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's 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's 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 'Saving To Get A Foot On The Property Ladder' 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's 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 'catch up'. 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.