First-time buyers: how much do you need to save for a mortgage deposit?

Single first-time buyers need to save for an average of six-and-a-half years to buy their first home.

That’s according to a new report by the price comparison site Reallymoving, which analysed how much buyers need to cover a mortgage deposit and the additional costs of moving.

Read on to find out how much house deposits vary across Great Britain, and for advice on what’s happening in the property market. 

The up-front costs of buying a home

First-time buyers need to save an average of £25,000 to cover a 10% house deposit and the additional costs of moving, including conveyancing, house surveys and removals.

Based on an average first-time buyer purchase price of £234,000, Reallymoving estimates buyers will need to put aside the following: 

• 10% deposit: £23,400
• Conveyancing: £1,314
• House survey: £420 
• Removals: £420

The comparison site found that a single first-time buyer needs just under six-and-a-half years (76 months) to save this amount, based on them putting 10% of their salary away each month.

This figure halves if a couple purchases a property, assuming both partners earn an average salary. 

• Find out more: the bank of mum and dad – how to help your child buy a home

The cost of buying a property in your region 

Reallymoving analysed average salaries and house prices across Great Britain and uncovered major differences in how long it takes to save.

Unsurprisingly, London was the most difficult place to buy a home, with first-time buyers on an average salary needing to save for more than eight-and-a-half years (104 months) before they can buy. 

This is nearly double the time required in Scotland and the North East of England, as shown in the table. 

First-time buyers are buying bigger properties

Reallymoving found that high house prices have resulted in people waiting longer to buy their first home. It says the average age of a first-time buyer is now 33. 

This has had an impact on the type of properties being purchased. Around half of first-time buyers in 2023 bought a three-bedroom property or bigger, as shown in the chart below. 

This reflects how buyers in their thirties are looking to buy bigger homes as they start families, or are saving for longer to skip the traditional first rung on the property ladder.

A lifetime Isa could help you buy sooner

Reallymoving also found that savers can get on the ladder more quickly by taking out a lifetime Isa.

These savings accounts allow people to save up to £4,000 a year and receive a 25% bonus when they come to buy their first home.

To qualify, you’ll need to be aged 18-39 at the time of opening an account. Interest rates of up to 4.4% are currently available. 

Reallymoving says lifetime Isas can reduce the saving time required by a single first-time buyer by 16 months. 

• Find out more: lifetime Isas

Could low-deposit mortgages help?

Reallymoving’s report is based on saving enough for a 10% deposit, but it can be possible to get a mortgage with less cash. 

95% mortgages all but disappeared during the pandemic, but many major lenders are now offering deals for buyers with small deposits.

There are a couple of caveats. First, these deals tend to be more expensive. Right now, the cheapest 95% two-year fix is priced at 5.35%, compared to 5.09% for a 90% deal. 

This means you’ll pay more in interest, and that it’ll take you longer to grow the stake of the property you own outright. 

You could also be vulnerable to negative equity in the unlikely event that house prices fall significantly. This is where you owe more on your mortgage than the property is worth. 

• Find out more: best mortgage rates in March 2024

When will mortgage rates fall?

Alongside saving a house deposit, high mortgage rates pose a significant challenge for would-be first-time buyers. 

Although rates have fallen since peaking last August, they’re still well in excess of where they were a couple of years ago.

This means that you might find you can borrow enough to buy a home, but you’re priced out by the projected mortgage repayments.

Experts anticipate that mortgage rates will begin to fall again when the Bank of England base rate drops, though that might not happen until the second half of this year. 

If you are looking to buy, you might find it helpful to consult a mortgage broker, who will help you find a suitable deal for your circumstances. 

• Find out more: how the base rate affects mortgages

What’s happening to house prices?

High mortgage rates have resulted in fewer people buying homes, and therefore a much slower property market.

The good news for buyers is this means you might be able to secure a good deal on a property by offering less than the asking price. 

Back in November, the property portal Zoopla found sellers were having to knock an average of £18,000 off their initial asking prices to sell their home.

It says that it is now seeing fewer reductions, but that prices remain sensitive and buyers in the South East and East of England are seeing the most reductions of 5% or more. 

• Find out more: what’s happening to house prices?

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