First-Time Buyers Need More Money Than Ever Before

First-time buyers in 2020 needed £10,000 more deposit than they did in 2019, making homeownership even more difficult to attain to thousands of young people. 

There is a lot of bombasity around the booming housing market in 2021, due in no small part to the SDLT holiday currently being offered to homebuyers. But, with all this success and back-slapping, one thing has been forgotten – those people for whom homeownership is most difficult to attain are in a more difficult position today than they were a year or two ago.

Having to find an extra £10,000 for a mortgage deposit means first-time buyers in 2020 required an average of £57,278 cash up-front in order to buy a home, up from £46,449 in 2019. Today, in 2021, this number could be even higher, but we’ll need to wait for the data to be published in the coming months.

These numbers, provided by Halifax, tell us that first-time buyers in London were in an even worse situation, having to find an extra £20,000 in 2020 compared to 2019 in order to pay an average deposit of £130,357, compared to £110,145 12-months earlier.

The increased pressure on first-time buyers was to be expected. With the housing market experiencing super-charged demand towards the end of 2020, prices started going up. At the same time, mortgage lenders had little confidence that this boom was going to last and thus seemed reluctant to offer generous lending rates. 

The good news for first-time buyers is that this appears to be changing.

Mortgage providers more easy-going in 2021?

As the strength of the housing market continues into 2021, mortgage lenders are becoming more confident that this boom isn’t a temporary glitch. 

They now believe it will be a long-lasting period of success for the housing market and are once again starting to offer 90% mortgages to first-time buyers, something they stopped doing altogether in the darkest days of the Covid-19 pandemic.

So, while first-time buyers were under extreme financial pressure in 2020, needing as much as £130K in the bank to get on the ladder, 2021 might be easier thanks to the mortgage providers, just so long as buyers aren’t put off by the larger interest rates involved with such 90% mortgages. 

Looking even further down the line, before the Covid-19 pandemic stole all attention, Boris Johnson’s government was promising more government-backed mortgages to help first-time buyers get onto the market. If this comes to fruition, we could see a boom in first-time buyers entering the market which can only be good for a UK economy which is currently under immense pressure.