This is according to analysis by digital wealth manager, Nutmeg, which has calculated aspiring homeowners need, on average, five years and four months to raise a 10% deposit for a home in England.
It’s an increase of seven months on the average time take in 2017, when the Lifetime ISA (LISA) – the tax-free savings account for first-time buyers – was launched.
Indeed, the data was based on a buyer who was investing the maximum allowed annually – £4,000 – into a LISA, which benefits from a 25% government bonus, to save for the deposit.
Yet, even with this financial boost, the data revealed how the continued rise in house prices was challenging first-time buyers’ finances – not just in London and the South East, but across England.
Annabelle Williams, personal finance specialist at Nutmeg, said: “Many people think that problems with housing affordability are confined to London and the South East, and that if young people were more sensible with their money they would be able to buy homes easily.
“These figures starkly show how that is far from true. Property prices may be lower in different parts of the country but so are average salaries. And so first-time buyer deposits need to be looked at in the context of what people can earn in a given area – in many cases the deposit is far higher than the typical annual wage.”
Regional savings challenges
Indeed, Nutmeg’s analysis revealed how the average house price in, for example, Shropshire was nearly 17% higher in September 2021 than 12 months previously.
It meant first-time buyers must save for an additional year, for an average of five years and one month, to raise the £25,516 needed to get on the property ladder here.
In County Durham, house prices were 16.5% higher – meaning first-timers here must save for two years and one month to raise a £11,895 deposit.
They were 15% higher in Northumberland, where it would take three years and eight months to accumulate £18,493; and 14.8% in Rugby, where it would take five years and six months of saving for a £27,414 deposit.
Annabelle said: “The later an individual secures their first mortgage, the later they will pay it off. This affects retirement planning too, as people may have fewer years of being mortgage-free when they can channel more of their earnings into their pensions.
“Prospective homeowners can speed up the amount of time it takes to raise their deposit by using the Lifetime ISA and, depending on the individual’s age and circumstances, some people can boost their deposit through investing in a diversified portfolio.
“However, investing comes with risks and there’s always the potential for financial loss, so do your homework and always choose a reputable investment provider.”
Lifetime ISA
Individuals can save a maximum of £4,000 annually – equivalent to £333 a month – into their Lifetime ISA (LISA). They will also receive the 25% annual cash bonus from the government. Nutmeg said those saving without the LISA may find it takes even longer to achieve their dreams of home ownership.
Lifetime ISAs can be opened by those aged 18 to 39 and the money held in the account must be used either to purchase a first home priced at £450,000 or less, or for retirement. Withdrawals in most other circumstances incur a penalty charge.
You can find out more about the Lifetime ISA along with some other savings tips here.
You can also learn more about saving for a deposit in our first-time buyer savings guide.
