Average house deposit is now £66,000

Posted on September 17th, 2011 | Categories - News

New research has shown that the average deposit put down by home buyers is now £66,000; the figure has increased significantly in recent years and now is 1.7 times the average annual income in the UK.

The research, undertaken by the bank First Direct, shows the size of the average deposit has increased tenfold over the past 20 years. In these tough times for the housing market with the spectre of negative equity and tight lending criteria the new figures show how hard it can be for home buyers, especially first time buyers, to by a property.

Significant rise

According to First Direct, the average deposit needed to buy a house in 1990 was just £6,973 by 2011 this figure has risen significantly to £65,924. This represents an increase of almost 10 times, whereas house prices have only risen fourfold in the same period.

The rise in the size of deposit needed is partly down to the rise in house prices, but over recent years is more attributable to the stricter lending criteria imposed by the lenders follow the credit crunch.

Indeed Bruno Genovese, senior savings product manager at First Direct, said that 2010 was the hardest year out of the last 20 to buy a house in the UK, with the average purchase price six times the average income.

He continued: “Much has been made of rising house prices, but the average deposit needed in the first place has actually risen more than twice as fast as house prices and almost four times as fast as income.”

Loan to values

Unsurprisingly the research also showed that the average loan to value, in other words the percentage of the purchase price borrowed, has also fallen dramatically.

In 1990 the average percentage that a homebuyer could borrow was 88% of the purchase price; today’s figure has fallen to 73%.

First time buyers

The research emphasises how hard it is for first time buyers to get onto the housing ladder with the need for higher deposits competing with other requirements for cash, often including the repayment of student debt.

As a result the average age of a first time buyer continues to rise, it now stands at 35 and a recent survey by the Post Office showed that over 50% of those people not already on the property ladder do not think they will ever be able to buy their own home.

Often being at the bottom of the chain first time buyers are seen as the lifeblood of the housing market and the research by First Direct may go some way to explaining why the housing market is going through such a stagnant period.