Wednesday January 17, 2018
According to recent statistics provided by Nationwide, in most regions it would take about eight years for the typical buyer to save for a deposit. This rises to nine years in the South East of England and to nearly 10 years in London.
Mortgage lenders have been told by regulators to set stricter affordability requirements since the financial crisis, to avoid financial stress on the system and on individual borrowers. This has created noticeable extra pressure on the need for first-time buyers to save compared with before the financial crisis. Many have turned to parents and other relatives to help with the cost.
Iona Bain, founder of the Young Money Blog, said this could be dangerous for young borrowers.
“The Bank of Mum and Dad, or Granny and Grandad, can come with big legal pitfalls, particularly if you’re borrowing money with a partner, while trying to grow your money in more exotic ways through crowdfunding or Bitcoin, for instance, could put your whole deposit at risk,” she said.
“The only other alternative is to simply save harder for longer. That means putting all your spare change into a home where you’ll have to live for many years to come, since you’ll struggle to move up the housing ladder.”
Ian Wilson Craw, of the Generation Rent lobby group, said: “High housing costs are eating into renters’ take-home pay which makes saving for a deposit difficult in the country as a whole but near impossible in London and the South East of England.”
It is apparent that saving has never been tougher but also that buying your own home is still the better option when it does become affordable. Monthly mortgage costs can often be surprisingly affordable when compared to rental charges. Please do give us a call here at The Finance Roome if you need advice on what you can afford.