UK-wide rise in time taken to save for first house

It takes first time buyers six months longer to save for a house deposit when compared to the first quarter of 2004 and one year nine months longer than in 1994.

According to research from National Savings and Investments (NS&I), since the first quarter of 2004, the time necessary to save for a 5% deposit on a typical first home in the UK has increased from four years to four and a half years.

With the average first home now 12% more expensive compared to the first quarter of 2004 and the typical first time buyer’s income increasing by only 6% in the same period, it is harder than ever for those who want to get a foothold on the property ladder.

Dax Harkins, senior savings strategist at NS&I, said: “The deposit for the average first time property in the UK is now nearly £7,000, but first time buyers can reduce the long-term cost of buying a home by starting to save earlier and putting as much as they can towards a deposit.”

In 1994 Q1, it took just two years nine months to save a 5% deposit and first time buyers’ incomes averaged £18,444, while a typical starter home was only £49,021, so the deposit needed was £2,451 – just over a third what is required today. The average price of a first time buyer home in 2004 Q3 is £137,000 and the 5% deposit required is £6,866. The combined average income for first-time buyers is currently just over is £33,000.

However, the first signs of a cooling house market offer a glimmer of hope for would-be first time buyers. Between 2004 Q2 and 2004 Q3, the time taken to save for a deposit remained static in five regions: London, Yorkshire & Humberside, East Midlands, East Anglia and Northern Ireland.

Increases in interest rates on savings higher earnings and slowing house price rises could see the time required to save for a deposit reduced in the coming months.

(MB/SP)