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Press releaseFIRST RUNG OF THE PROPERTY LADDER HIGHER THAN EVER FOR FIRST-TIME BUYERS03 June 200415 month increase for first-time buyers in East Anglia Four years to save for deposit in South EastIt takes first-time buyers a year longer to save for a house deposit than a decade ago, according to National Savings and Investments (NS&I). The research revealed that, since 1994, the time it takes to save for a 5% deposit on a first home has increased from two years nine months to three years nine months. With increases across the UK of between three and 15 months for the average first-time buyer to save for a deposit, it's harder than ever for those who want to get a foothold on the property ladder. The extra time taken is down to the fact that income increases (68%*) have not matched increases in house prices (142%*) over the past ten years. Gill Cattanach, marketing director at National Savings and Investments, said "The growing gap between increases in house prices and incomes means that those thinking about buying homes for the first time need to start saving earlier." The regional view Worst affected are first-time buyers in East Anglia, where a deposit is taking 50% longer to save in 2004 than a decade ago; 30 months (two and a half years) in 1994, compared to 45 months (three years and nine months) in 2004. Even first-time buyers in the least affected area of the East Midlands are facing an 8% increase in the number of months it takes to save a deposit, up from 39 months (three years and three months) in 1994, compared to 42 months (three years and six months) in 2004. In the South East, first time buyers face having to save for 48 months (four years), compared to Scotland and Northern Ireland where the average is 33 months (two years and nine months). Time to save for typical 5% deposit
Source: National Savings and Investments A surprise for Londoners Although the price of the average first home in London has risen by 164% in 10 years, savers in London are not facing the longest wait to raise their deposit, probably because incomes are proportionately higher than the rest of the UK. Gill Cattanach, of National Savings and Investments, continues "We're urging first-time buyers to start saving now, and to continue saving on a regular basis. Even a little bit extra tucked away in a savings account each month could reduce significantly the period of time first-time buyers have to wait until they can enjoy the excitement of moving into their first home." John Wriglesworth, an analyst at Hometrack, said: "It is not surprising that many potential buyers are feeling compelled to take out even larger 100% mortgages or self-cert mortgages, which are typically much more expensive then standard ones. Some first time buyers are even taking out unsecured loans in order to afford a deposit. In many cases, buyers are not properly assessing the true long term costs of the higher rate loans against the advantages of saving longer for a deposit which will enable them to obtain a much cheaper mortgage. The longer it takes you to save a deposit the more house prices will increase, so saving greater amounts regularly will help to secure your dream home sooner, and at a more affordable price." Many of the savings and investments available from NS&I afford a simple and straightforward way for people to start saving seriously for the first time. These products include the Easy Access Savings Account, Cash mini ISA (tax-free) and Investment Account, which offer competitive rates and easy access. The Easy Access Savings Account pays 3% to 4.05% for balances of £1,000+ and the Cash mini ISA pays 3.95% tax free. All are available through Post Offices TM, by telephone (0500 500 000) and on the web-site (www.nsandi.com).
Ends Notes to Editors* Source: Office of the Deputy Prime Minister Sources and methodology The research compares the number of months a first time buyer needs to save to achieve a deposit on an average first-time buyer property purchased in 1994 Q1 and 2004 Q1. It is assumed that first time buyers save 5% of their income per quarter and place this in a typical building society/ bank savings account, which accumulates interest. The analysis works out the number of quarters it would take to afford a 5% deposit on a typical first-time buyer property, purchased in 1994 Q1, and 2004 Q1, respectively. Average house prices for first time buyers in 1994 and 2004 are taken from two Office of the Deputy Prime Minister (ODPM) reports: Housing and Statistics Annual report 2001 (chapter five): Complete tables and Live Table 516. Deposits are worked out at 5% of the first time buyer prices. Figures for the relevant average recorded quarterly incomes of first time buyers are also taken for these ODPM reports. Quarterly savings interest rates are derived from Building Savings Association/ Council of Mortgage Lenders statistics for average annual interest rates for savings deposit accounts. The analysis is undertaken for each of the 12 major standard economic regions of the UK. Source: ODPM First-time buyers incomes 1992 and 2004
Source: ODPM ENDS NS&I media teamFor further information, digital images, or to arrange an interview call the NS&I media team.
Media team The numbers below are for media use only. Customers wishing to contact NS&I can find details here.
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