First-time buyers ‘may need to raise thousands more to get on property ladder’

First-time buyers in England face needing to raise around £12,000 more if they now find they need to put down a 15% deposit rather than 10%, according to analysis.

The number of 5% and 10% mortgage deals on the market now stands at just a fraction of the amount before the lockdown.

If a 10% deposit is required, people taking their first-step on the property ladder in England may need to put down around £24,000 typically, according to analysis by Rightmove, based on the average price tag on a typical first-time buyer home.

But if a 15% deposit is needed, then a buyer may need a deposit of around £36,000 – with the £12,000 difference perhaps coming from their own savings or the “bank of mum and dad”.

England’s housing market re-opened for business last week.

But those hoping that now is their chance to get on the property ladder will find that many low-deposit mortgage deals have vanished while the housing market was on pause.

Figures from Moneyfacts.co.uk given to the PA news agency show that, as of Tuesday this week, there were just 30 deals available for those with a 5% deposit – less than a tenth of the number two months ago. Some 387 5% deposit deals were on the market on March 19.

The number of 10% deposit deals available has also nosedived, to 87, from 782 two months ago.

The choice of 15% deals has also dwindled over the past two months. The shrink back has been less severe, falling from 677 15% deposit deals on March 19 to 251 by Tuesday.

Rachel Springall, a finance expert at Moneyfacts.co.uk, said: “It is hoped that in time the higher loan-to-value deals will return, albeit slowly.”

She added: “First-time buyers who now feel their deposit doesn’t go as far as they had hoped may now need to wait a lot longer to get a step on the property ladder, or feel they have to approach the bank of mum and dad to boost their deposit and open the doors to more deals.

“Still, there may well be borrowers out there who will want to wait and see what the months ahead may bring and postpone their house-hunting until more higher loan-to-value deals return to the market.”

Rightmove said the typical price tag on a first-time buyer home in England is £241,891. This is 2% higher than a year earlier.

This includes studios, flats and houses with two bedrooms or fewer.

The average first-time buyer 10% deposit would be £24,189, jumping to £36,284 if a 15% deposit is needed, Rightmove said.

Its analysis of 20 cities or large towns in England found people trying to buy their first home in London would need £47,757 to raise a 10% deposit.

For a 15% deposit, £71,635 would be needed, on average.

There is a £58,000 gap between the biggest and smallest 15% deposits needed in the locations Rightmove analysed.

It found first-time buyers in Bradford need the smallest deposits. The 10% deposit there would be £8,995 and a typical 15% deposit would need savings of £13,492.

Some mortgage applications were temporarily paused during the lockdown while lenders were unable to make physical property valuations.

HSBC UK announced last week that it has been able to re-start physical valuations, meaning it can start to process some applications which had been temporarily halted.

Rightmove’s commercial director Miles Shipside said: “Many first-time buyers looking to grab a bargain right now may find they’re disappointed, as on the whole, asking prices of all first-time buyer properties up for sale have been holding up.

“There will of course be some sellers who need to sell quickly and may be willing to negotiate on price so it’s worth asking your local agent if there’s any with this predicament if you do now need to lower your budget.

“However, where demand is outstripping supply and it’s an attractive property in a desirable location, then an offer closer to the asking price will have a better chance of being accepted.”

He said buyers could try searching for recent sold prices of homes in the same area to gauge whether a property they are viewing may be over-priced and help give them confidence about how much they should be offering.

Rightmove has created some tips to help people in England view properties safely at www.rightmove.co.uk/news/articles/property-news/how-to-view-property-safely.

Government guidance for England can also be viewed at www.gov.uk/guidance/government-advice-on-home-moving-during-the-coronavirus-covid-19-outbreak.

Here are average 10% and 15% deposits needed for typical first-time buyer properties in cities or large towns analysed by Rightmove:

– London, £47,757, £71,635

– Manchester, £16,778, £25,167

– Birmingham, £15,873, £23,809

– Bristol, £24,069, £36,103

– Liverpool, £11,225, £16,837

– Nottingham, £14,394, £21,590

– Bournemouth, £21,316, £31,974

– Newcastle-upon-Tyne, £12,723, £19,085

– Leeds, £13,899, £20,848

– Southampton, £17,452, £26,178

– Sheffield, £12,972, £19,458

– Plymouth, £14,306, £21,459

– Leicester, £15,062, £22,593

– Brighton, £30,960, £46,440

– Portsmouth, £17,843, £26,765

– Stoke-on-Trent, £10,080, £15,120

– Hull, £9,759, £14,638

– Bolton, £11,434, £17,151

– Reading, £24,713, £37,069

– Bradford, £8,995, £13,492

Here are the average 10% and 15% deposits needed across England’s regions, according to Rightmove:

– North West, £12,962, £19,444

– East Midlands, £14,926, £22,390

– Yorkshire and the Humber, £12,978, £19,467

– West Midlands, £15,099, £22,648

– South West, £20,254, £30,381

– London, £47,757, £71,635

– North East, £10,034, £15,051

– East of England, £22,939, £34,409

– South East, £25,035, £37,553