first time buyer deposits paid across the uk

Since the government's announcement on 23 September 2022, mortgage rates have surged, appearing as if they've been propelled into the financial stratosphere, dramatically altering the landscape for both prospective homeowners and current mortgage holders.

For those aiming to purchase a home in the UK, first-time buyers typically save between £26,400 and £144,500, as per new data. The average deposit for a three-bedroom home in 2023 stands at £34,500 for a property valued at £240,000, equating to a 15% deposit. However, the required savings vary based on location and desired deposit level.

In London, where the average price for a first home reaches £425,000, the average first-time buyer deposits a staggering 34%, equivalent to £144,500. Nonetheless, such high prices are more of an exception in London compared to most areas across the UK, where first homes come with more manageable price tags, making homeownership more feasible.

Data indicates that most first-time buyers aim for a larger deposit, typically around 24% of the property price, as it often unlocks better mortgage rates from lenders. For instance, to secure a 24% deposit on a £240,000 property, one would need to save £57,600.

While some lenders may offer 100% mortgages to suitable borrowers, allowing them to purchase a property without a deposit, such mortgages are considered high-risk and relatively scarce in the current market. Despite being elusive since the financial crisis, signs suggest they may be resurfacing.

However, most 100% mortgages available today are guarantor mortgages, necessitating a family member's guarantee. Eligibility for these mortgages extends beyond first-time buyers to include home movers and those seeking to remortgage, subject to lender criteria. Nonetheless, obtaining a guarantor does not guarantee approval, as lenders meticulously scrutinize applicants' finances to ensure they can meet monthly repayments.

Several factors, including a poor credit score and existing debt repayments, could diminish approval prospects. Consequently, while a 100% mortgage may seem appealing, seeking professional mortgage advice is advisable to evaluate all aspects before committing.

Alternatively, the 95% mortgage scheme, running until the end of 2023, requires only a 5% deposit, with the government guaranteeing a portion of the mortgage above 80%. This scheme serves as a safety net, encouraging lenders to offer 95% mortgages and facilitating homeownership for those struggling to save large deposits.