First time buyer needs £32,000 deposit to get on property ladder

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by Kay Murchie

Falling house prices should be good news for first-time buyers (FTBs) but research shows that in order to secure a mortgage, FTBs need on average a deposit of £32,000.

Since the onset of the credit crunch, almost two years ago, lenders have significantly tightened their lending criteria and the number of deals have been dwindling.

The best deals are saved for those with a hefty deposit - at least 25%.

Research from moneysupermarket.com, the price comparison website, shows that some 13% of 18 to 34 year olds are now thinking about buying their first home.

However, just 25% of potential buyers have saved a deposit which leaves three quarters wondering where the money will come from. Many are relying on the ‘bank of mum and dad’.

However, worryingly 16% are thinking about taking out a loan to cover the cost of the deposit but Louise Cuming, head of mortgages at moneysupermarket.com, warns that this is ‘dangerous’.

Ms Cuming comments: “Taking out a loan to pay for a mortgage deposit is a dangerous move, and must be avoided even if it means you have to delay buying your first home.”

She adds that if the lender discovers where the deposit came from, the mortgage application will be rejected.

In related news, last week housebuilders Bovis, Redrow, Barratt and Persimmon highlighted that the lack of mortgage finance continues to hinder a recovery in the housing market.

The latest figures from the Council of Mortgage Lenders show that mortgage lending improved in May. However, the number of home loans were still 28% lower than a year ago.