New research has revealed that one in five first-time buyers will have more difficulty getting on the housing ladder following the Bank of England’s decision to cut interest rates.
According MoneySuperMarket, 21% of 18 to 34-year-old prospective buyers said that following this month’s interest rate cut they will now find it more difficult to reach their deposit goal.
MoneySuperMarket said that first-time buyers saving for a deposit estimate they need an average of £24,880 to buy their first home, a 14% increase from last year’s estimated amount of £21,885.
Most had so far only saved less than half of their desired total (£9,632), taking them an average of seven years if saving alone and three years if saving with a partner.
With the current average house price £214,000 according to the Office of National Statistics, first-time buyers will need on average a £21,000 deposit to buy a home, more than double the amount they have saved.
All prospective buyers saving alone think it will take another eight years to reach the full amount they need for a deposit, and those saving with a partner think it will take three and half years more. Consequently, the average age UK house hunters estimate they will be able to take their first step onto the property ladder is now 37-years-old.
Kevin Mountford, banking expert at MoneySuperMarket, said: “The Bank of England dealt a blow to savers when cutting interest rates to 0.25% this month and, as a result, first-time buyers now face the prospect of having to save for longer due to dwindling savings rates. This is coupled with the general rise in house prices seen during the first six months of the year, even though prices dropped slightly in July. However, it shouldn’t be all doom and gloom, as there are still opportunities to save if you look for them and putting the most you can afford away each month will also help.
“Savers shouldn’t settle for a miserly rate if there’s a better one to be found elsewhere, whether that’s via ISAs, bonds, peer-to-peer lending, or current accounts. The Help to Buy ISA is designed specifically to help those trying to get on the housing ladder and, when it comes into force next year, the Lifetime ISA can be put towards a property purchase. First-time buyers should make the most of these initiatives.”
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