Ten years ago before the housing boom in the UK began someone with £40,000 handy could look at purchasing a property outright. However, these days many will be lucky if this covers much more than the deposit on a property. A recent report has shown that the average first time buyers in London needs a whopping deposit of around £32,500 these days, as lenders are now asking for around 13% of the property value by way of a deposit.

This is a trend that has been seen in all areas, with lenders withdrawing 100% mortgage from the market and demanding more than the traditional 5% in order to avoid having to pay hefty interest rates. This has hit first time buyers hard, as they do not have a previous property from which to take equity and therefore have to find the deposit by some other means. The average entry levels home in London costs around £250,000, so a sizeable deposit is essential.

One industry official said: ‘Aspiring first-time buyers are no better off. As prices remain at record-high levels, more and more lenders demand that borrowers put down larger and larger deposits. Activity levels in the capital’s housing market are likely to remain very subdued. This will increase the chances that house prices fall considerably further, so first-time buyers may do well to wait.’

Another added: ‘Those who get away with smaller deposits get worse mortgage rates and risk falling into negative equity. I see no improvement in this situation in the short term.’

Lack of affordability amongst first time buyers has now resulted in far fewer first time homeowners entering the market, with property sales figures slumping.

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