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First time buyers need help from family to raise deposit

Saving for getting on the property ladder is difficult as it takes up to 15 years in London to build up a 20% deposit without family help.

The latest research from Nationwide reveals first time buyers in London must save for 15 years for a 20% deposit to get on the property ladder, longer than the ten years before the financial crisis in 2008.

Even in regions with affordable property values in the North of England and Scotland it can take a prospective home buyer on average earnings five years to save a 15% deposit.

In Wales and Northern Ireland it takes almost seven years and for people living in the West Midlands is almost eight years leaving first time buyers and home movers to turn to family and friends for help with ways of raising extra money.

Family and friends help with deposit

As houses prices have increased over the decades the amount of support has risen from 25% helping first time buyers in the mid-1990s to 35% in 2015/16.

First time buyers now rely more than even on help with the deposit as almost 50% of all buyers in 2017/18 receive an inheritance, gift or loan from family and friends.

Help can be provided by older family members as the equity release buyer can release cash from your home by using a lifetime mortgage and gift to a child or grandchild.

In the UK rising house prices has resulted in annual growth up 1.4% for the last quarter and property values averaging £215,282.

These higher property values are an advantage for existing homeowners such as grandparents as cash can be released with small provider loan to values making the interest rates much lower.

The children and grandchildren could pay the equivalent monthly interest to the family member and this would help to reduce the cost of equity release to avoid interest rolling-up over time.

See what the figures look like and the monthly interest rate per month to release a lump sum upfront for a deposit on a property using this link:
Free equity release calculator to show the monthly interest amount for a deposit on a home.

Despite the difficulties raising the deposit, the number of first time buyers has continued to recover to 354,400 a year, more than double the 155,000 during 2009 but 12% lower than the peak reached in 2006.

This has been fuelled by low borrowing costs, strong levels of employment and rising earnings meaning the cost of repayments for the typical mortgage have remained affordable compared to take-home incomes.

London is the weakest market

The capital is the weakest performing region with house prices lower by -1.8% or -£8,401 although it has the highest average property values of £458,363.

Although this is the tenth quarter that prices are lower in London the average values are only 5% down on the highs achieved in 2017 and remain a healthy 50% up compared to 2007.

Similarly Outer South East regions declined by -1.0% such as Oxford, Southampton and Brighton whereas Outer Metropolitan regions have seen growth of 0.3% annually for the last quarter.

Rather than purchase in London, buy-to-let investors may look to the Outer Metropolitan areas of Chelmsford, Slough, Guildford and Crawley for affordable properties to help improve rental yields.

The best performing region was Scotland with annual growth of 2.8% for the last quarter while in England the leader was the West Midlands up 2.7% and the North rising 2.6%.

What are your next steps?

Talk to our London City Mortgage advisers if you are an older homeowner releasing equity from your property, we can recommend the lifetime mortgage to access wealth to generate a lump sum upfront.

Lean about the best providers and products for a lifetime mortgage if you intend to release cash from your home and gift to your family at this link:
Free equity release quote for products to access money to gift to your family.

At LCM our mortgage advisers can find the best products for the lump sum amount you want to access. Learn more by using the equity release calculator, property value tracker chart and mortgage costs calculator.


Mortgage Best Buys

These are examples of mortgage products we can approach with many more offering interest rates and flexibility to meet your needs.

1.18% Fixed Rate
60% Loan to Value
£1,034 App Fee
Until 31/10/2022
Reverts to 3.59%
1.19% Fixed Rate
60% Loan to Value
£999 App Fee
2-Years Time
Reverts to 3.59%
1.16% Fixed Rate
60% Loan to Value
£1,525 App Fee
Until 01/11/2022
Reverts to 4.09%
1.17% Fixed Rate
60% Loan to Value
£1,025 App Fee
Until 31/09/2022
Reverts to 3.59%

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  • IMPORTANT

    Equity Release may involve a Lifetime Mortgage or a Home Reversion Scheme. To understand the features and risks, please ask for a personalised illustration. Equity Release may affect your entitlement to means tested state benefits and will impact on the size of your estate. For Equity Release London City Mortgages charge a fixed fee upon completion of £695. For Mortgages a fixed fee is charged on application. Typically this is from £295 up to £495 for the services selected.

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