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Smaller deposits raise hopes for UK first-time homebuyers

Young women look at an estate agent window
It takes an average single buyer nearly 12 years to save a 15% deposit for their first home, says Hamptons. Photograph: Yui Mok/PA

Easier access to mortgages with a small deposit has offered some glimmers of hope for first-time buyers struggling to get on to Britain’s housing ladder, according to a new report.

Research on the amount of time it takes to save for a down payment on a home suggests buyers have been helped by the greater availability of mortgage loans at higher loan-to-value (LTV) ratios.

The estate agent Hamptons International said that in the final months of 2016 it would take an average single first-time buyer 11 years and nine months to save a 15% deposit. But reducing the deposit to 10% cut the saving time to eight years and three months. For a deposit of just 5% the time to save was four years.

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Hamptons highlighted Bank of England figures that suggest such deals with smaller deposits have become more widespread in recent years. The proportion of loans made at a 90% or more LTV ratio was 5% in 2016, up from 3.8% in 2015.

Hamptons said that increasing availability of lending at higher LTV, combined with lower mortgage rates, had improved the ability to buy for first-time buyers. That cautious optimism over affordability chimes with other commentators on the housing market who have highlighted recent signs of cooling in price growth as good news for first-time buyers.

However, the estate agency cautioned that the fact house prices grew faster than incomes last year meant anyone going for a mortgage with a 15% deposit would have found it harder, not easier, to save for their down payment. The average length of time for a single first-time buyer to save a 15% deposit in the fourth quarter of 2016 was a whole year longer than in the fourth quarter of 2015.

“It still takes an average single buyer nearly 12 years to save a 15% deposit for their first home. That’s a whole year longer than at the end of 2015. But it’s not all bad news,” said Fionnuala Earley, residential research director at Hamptons.

“Lenders are increasingly offering higher loan-to-value mortgages and the rates charged on them have come down more than for any other mortgage type.”

A separate report from chartered surveyor e.surv found that buyers who put down a small deposit were making up an increasing share of the market.

 

Richard Sexton, a director at e.surv, said: “This is a trend which started at the end of last year and has continued into 2017. Likely buoyed by the number of government schemes and low mortgage rates across the board, small-deposit buyers are growing in strength in today’s mortgage market.

“A more first-time buyer oriented market is good news for all as new buyers help start chains and allow others to move up the housing ladder – vital for a properly functioning property market.”