Despite the return of 95 per cent mortgages under the Help to Buy 2 scheme, 62 per cent of aspiring first-time buyers (FTBs) cannot afford a deposit for a home loan.
The figures were revealed following a study by mortgage insurance provider Genworth, which also found that a further 19 per cent of prospective FTBs cannot afford the monthly mortgage payments for the home they desire.
Only 32 per cent are actually saving for a deposit, including just 17 per cent who are able to save each month. Regular savers put aside an average of £393 per month for a deposit.
At this rate, it would take them 1 year and 7 months to raise a 5 per cent deposit (£7,792) for the average first time buyer home in the UK, and 3 years to do so in London.
Waiting game
Without Help to Buy 2 boosting access to high loan to value (LTV) mortgages, they would face a wait of nearly 5 years (or 9 in London) to save a 15 per cent deposit for an 85 per cent mortgage – the typical maximum LTV for first time buyer products pre-Help to Buy.
Despite speeding up the time needed to save for a deposit, there is widespread ignorance about Help to Buy 2 with 40 per cent of aspiring homeowners having no knowledge of the scheme or understanding of how it works.
Optimism about getting a mortgage has grown among the under-30s since Help to Buy 2 launched: 37 per cent of aspiring homeowners in this age bracket feel their chances have improved in the last six months, while just 16 per cent feel the opposite. But would-be owners above the age of 30 have grown more downbeat overall.
Just 5 per cent of aspiring homeowners expect to buy their first home in the next 12 months and 73 per cent do not expect to do so before 2017 when Help to Buy 2 is due to have finished.
More than one in three (36 per cent) feel they have no prospect of buying a home in the next ten years and a similar number (33 per cent) have given up hope of ever raising enough for a deposit.
Comment
Simon Crone, Genworth vice president – mortgage insurance europe, comments: “We should be under no illusion that the problems confronting first time buyers will disappear overnight. Raising a deposit of 15 per cent or more is an insurmountable challenge not just for younger generations, but also for many in their thirties and forties who have been locked out of the property market for most of their adult lives.
“Help to Buy 2 has made a start at returning 95 per cent mortgages to their rightful place in the mortgage market. But it is a long term challenge that needs a long term solution. We cannot simply desert aspiring buyers after 2016. The government needs to set out the next steps and look at how private insurance can make competitive 95 per cent mortgage products a permanent option.”
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