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Media centre /
Press releaseFIRST TIME BUYERS NOW TAKE FOUR AND A HALF YEARS TO SAVE DEPOSIT08 December 2004It takes first time buyers six months longer to save for a house deposit now compared to the first quarter of 2004 and one year nine months longer than in 1994, when house prices began their phenomenal rise. According to research from National Savings and Investments (NS&I), since the first quarter of 2004, the time it takes to save for a 5% deposit on a typical first home in the UK has increased from four years to four years six months. With the average first home now 12% more expensive compared to the first quarter of 2004 and the typical first time buyer’s income increasing by only 6% in the same period, it is harder than ever for those who want to get a foothold on the property ladder. Dax Harkins, senior savings strategist at National Savings and Investments, said, “The deposit for the average first time property in the UK is now nearly £7,000, but first time buyers can reduce the long-term cost of buying a home by starting to save earlier and putting as much as they can towards a deposit.” In 1994 Q1, it took just two years nine months to save a 5% deposit (see map) and first time buyers’ incomes averaged £18,444, while a typical starter home was only £49,021, so the deposit needed was £2,451 – just over a third what is required today. The average price of a first time buyer home in 2004 Q3 is £137,000 (2004 Q3 – see map) and the 5% deposit required is £6,866. The combined average income for first time buyers is currently just over is £33,000*. Future optimism However, the first signs of a cooling house market offer a glimmer of hope for would-be first time buyers. Between 2004 Q2 and 2004 Q3, the time taken to save for a deposit remained static in five regions: London, Yorkshire & Humberside, East Midlands, East Anglia and Northern Ireland. This can be explained by increases in interest rates on savings accounts, slowing house price rises and incomes continuing to rise across the UK. If these trends continue, the time required to save for a deposit could reduce in the coming months. Across the UK There are strong regional variations across the UK in the time it takes first time buyers to save for a deposit (see map). It takes longest to save in London, the South East and the South West, where the average first time buyer has to save for four years and six months to build up the 5% deposit. These regions account for the vast majority of households and housing stock, which is why the time taken to save equals the average for the UK as a whole. Buyers in Northern Ireland save for the shortest amount of time, with the average first time buyer taking three years and three months to raise their deposit. Northern Ireland enjoys a relatively low house price to income ratio, but has also seen house price rises much lower than the national average (see graph in Notes to Editors). Wales has seen the highest percentage rise in the time it takes to save for deposit – it now takes 33% longer than in the first quarter of 2004 for a first time buyer to save the required deposit. London, the South East, the South West and East Anglia recorded the lowest rises, all showing increases of just 6%. Across the UK, the time taken to save a 5% deposit increased by 13%. There are only three other regions where it takes less than four years to save for a typical firth home deposit; the North East, the North West and Yorkshire and Humberside (see map). Time to save for typical 5% deposit
Accelerated growth in house prices across Wales, Scotland and the Northern regions in the first half of 2004 caused higher than national average increases in the time it takes first time buyers to save. With prices in the South slowing and even falling, first time buyers can expect the time taken to build up a house deposit to stabilise or reduce as the effects of the cooling housing market spread across the country. Dax Harkins continues, “The increase in house prices in 2004 continues to hinder the first time buyer saving for a deposit. Despite improved returns on savings since quarter one, moving into their first home is now an even more distant dream for many than it was at the beginning of this year. “The evidence that, in some parts of the country, the length of time it takes first time buyers to save for a deposit has stabilised will offer some comfort to those aspiring to get on the first rung of the property ladder. We will watch the trends over the coming months with great interest.” (See PDF version of this Press Release for map and charts) Ends Notes to Editors * Source: Office of the Deputy Prime Minister
House Prices Q1 2004 and Q3 2004 (See PDF version of this Press Release for map and charts) For further information, digital images, or to arrange an interview call the NS&I media team. 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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