The average deposit for a homebuyer in London is a whopping three times greater than anywhere else in the country, new research shows.
According to conveyancer My Home Move, the average deposit paid for a Greater London property is 170% more than for a home outside the capital, despite deposit sizes as a proportion of purchase prices falling nationally by 1.81% from 27.58% to 25.77%.
The huge rise in house prices across the UK and in particular Greater London, has resulted in property buyers securing their home move with a deposit of £127,000 in the capital, nearly £30,000 more than in 2013 (£99,375).
Doug Crawford, CEO of My Home Move, said: “The London property market has always commanded greater prices than anywhere else in the UK but our research has shown just how extreme the situation is becoming. London property prices have risen by 27% in the last three years and while the rest of the UK has seen a small decrease in the average deposit size, those looking for a London home are depositing 170% more than their UK counterparts.
“This situation is unsustainable and has been driven by rising house prices. For some, their deposit will come from the equity in the property they are selling. However, for many, they will still need to save tens of thousands of pounds to make the move onto and up the property ladder.
“Ultimately, it still begs the question – who is going to help those looking to enter the capital’s housing market and those on the lower rungs of the ladder, first-time buyers and second-steppers? Earlier this year we predicted that 100,000 properties would be purchased in 2016 using gifted deposits courtesy of the Bank of Mum and Dad and based on these figures, it looks like a very large portion of these could be based in the Greater London area.”
Those looking to save for a deposit in London face a huge challenge. Soaring house prices and a dwindling supply of suitable homes have meant many first-time buyers have been squeezed out of the market.
Tougher affordability checks from lenders have also it increasingly difficult for buyers with smaller deposits to get on the property ladder.
The government has introduced a number of new schemes in recent years to help those looking to buy a home.
Help to Buy London launched earlier this year to give aspiring homeowners who have been frozen out of the market in London the opportunity to buy a home.
First-time buyers with a 5% deposit can borrow up to 40% of the value on a new home priced up to £600,000. They will need a mortgage of 55% to cover the rest.
Help to Buy ISAs, introduced in December, give first-time buyers saving for a deposit the opportunity to put away £200 a month in a dedicated ISA that the government will top up by 25%, up to a maximum of £3,000.
