First homes bought with a ‘no deposit’ mortgage accounted for one in 10 sales in the past two years, with the number in London even higher, according to a report released today.
This type of mortgage is usually reliant on backing from a guarantor, such as a family member, who will be liable if the buyer fails to pay their mortgage, or where a buyer’s parents can fund a deposit using the value of their home.
As many as 14 per cent of first-time buyers in London bought their home with a mortgage that doesn’t require a deposit.
The availability of this type of loan is partly responsible for the rise in first-time buyer numbers, despite the declining affordability of buying a home, according to Post Office Money, who released the research.
First-time buyer numbers rose 44 per cent since 2010, even though house prices have increased significantly more than average wages over the past decade.
First-time buyer numbers: up 44 per cent since 2010 (Alamy Stock Photo)
The report attributed the rise to an increase in the number of options available to people who struggle to save money for a deposit, including inter-generational loans and other help from friends or family members. Less than a third (27 per cent) of first-time buyers manage to raise the full deposit on their own.
Although the rise in house prices has made saving for a deposit and qualifying for a mortgage more difficult, the high cost of renting pushed most of those first-time buyers toward buying a home, with 43 per cent citing it as their main reason for wanting to buy.
LOCATION, LOCATION, LOCATION NO LONGER
The research also found that most buyers (92 per cent) were willing to compromise on some aspect of their home in order to get a foot on the ladder.
Rising house prices may have killed off the old property adage “location, location, location” as first-time buyers were more likely to compromise on the location of their home rather than on the property itself.
People moved an average of 5.2 miles – equivalent to 29 minutes’ travel time – further than planned when buying their first home between 2016 and 2018.
A quarter of these first-time buyers moved 45 minutes to two hours from where they originally planned in order to find more affordable homes.
The vast majority were happy with their decision to compromise with green space, quieter locations and increasing local house prices the top reasons for satisfaction with their new neighbourhoods.
Property size, having a garden, parking, proximity to friends and family and being close to work were the top five priorities for first-time buyers.