Lockdown measures have enabled many people to save more than they normally would, as they’ve no longer been paying to commute, nor to eat out or socialise. According to research by Yorkshire Building Society, those hoping to get onto the property ladder have been able to set aside an extra £500 a month on average since the pandemic began.
As a result, two-fifths (44%) of first time buyers questioned by the building society said that they expect to be able to buy a home sooner than they had previously intended.
However, rising house prices mean it’s still going to take time for them to build a deposit, with buyers facing on average a four-year wait to get on the property ladder. A fifth (22%) said that they thought it would take them nearer 10 years to save enough to buy their first home.
Nationwide Building Society’s latest House Price Index found that steep house prices mean that 10% deposit is equivalent to over 50% of a typical first time buyer’s income.
Ben Merritt, senior mortgage manager at Yorkshire Building Society, said: “Our research shows that for those who have benefitted financially from the impact of the Covid-19 crisis, it’s fuelled the ability to save more for a first home and brought the first step on the property ladder closer than people previously expected.
“However, with a fifth of first-time buyers having had their plans delayed by the pandemic, and the same saying they expect to have to save for up to a decade, it’s a stark reminder that the upfront costs of purchasing a house still prove too big a barrier to overcome for some.”
More mortgage options for those with small deposits
The good news for first-time buyers is that there are now a much wider range of mortgage options available to those with only a 5% deposit to put down. This is thanks in part to the Mortgage Guarantee Scheme, which was introduced in April this year and enables buyers to purchase a property costing up to £600,000 with a 5% deposit, with the government providing a guarantee on the mortgages offered. The guarantee is designed to cover some of the lender’s losses if the borrower defaults on the mortgage within the first 7 years of buying their home. You can find out more about how this scheme works here.