Research reveals shocking deposit saving times
According to the latest figures from MoneySuperMarket, prospective homeowners in parts of the UK may need to save for up to 27 years before they can afford to purchase a property in their current area.
The situation is particularly bad in London, with 16 out of the top 20 spots requiring the highest deposit relative to average salaries, being boroughs within the capital.
MoneySuperMarket investigated the average property price alongside the average salary to calculate the average deposit required to purchase a property in the UK.
The report found that the local authority of Kensington & Chelsea was the most unaffordable place to live in the UK. With the average house price in the region of £1.3million, a couple earning an average salary would require a 52% deposit before they could purchase a property in that same area. The combined average salary of couples living in Kensington & Chelsea is approximately £147,918. People would therefore have to wait an estimated 23 years before they would have saved enough to buy a home.
The boroughs of Westminster and Camden closely follow Kensington & Chelsea in the list of unaffordable places to live, with deposits of £554,996 and £490,738 required in order to purchase a property. The average deposit figure in Camden is 56% meaning that people will expect to save for 27 years, the longest period of any area in the UK.
Outside of the capital, areas such as South Bucks, Chiltern and Elmbridge feature in the top 20 list with all three areas requiring deposits over £200,000.
The study revealed that in 75 of the local authorities, a couple earning an average salary need a minimum of a 20% deposit to purchase an average priced home. In 39 of the local authorities, the same couple would require a higher deposit of more than 30% to afford an average priced house.
It is expected that in 34 local authorities it will take prospective buyers up to 10 years to save for a deposit to buy a home in their borough.
Kevin Mountford, MoneySuperMarket’s banking expert, said: “as house prices continue to rise, the dream of owning a home becomes harder and harder to reach for so many people. For those who want to take their first steps onto the ladder, reaching the minimum deposit levels required causes serious financial strain and, as our analysis highlights, many might be priced out of their desired area. Similarly, for those who already own their own home but are looking to take that next step up the ladder, the stretch could be a bigger burden than anticipated”.
He added: “It is important to strike a balance when relocating and prospective buyers shouldn’t stretch themselves too far”.
Mountford advises prospective buyers looking to maximise their chance of securing their dream home to start by paying off their debts, as lenders will take existing borrowing history into account when considering a mortgage applications.
A second tip, Mountford suggested, was to reduce the amount you spend each month as this will help boost the amount a lender believes you can afford to borrow.
The banking expert recommends all buyers to work out the total cost over the term of the deal, considering both rates and fees. He says: “don’t automatically be put off by high fees, as it may be worth paying them to benefit from lower interest rates. Costs can vary greatly between providers, so taking the time to shop around and work out the total amount you have to repay over the term of the offer is essential.”
Full article available on Property Reporter: http://www.propertyreporter.co.uk/finance/terrifying-deposit-saving-times-revealed-in-new-report.html