First Time Buyers Need To Save.

by Mark Johnston

                                              First time buyers need to save.

It seems that in these challenging financial times along with the wider economic issues at the present time, does not appear to have dampened first time buyers aspirations to get on to the property ladder.

A recent survey has suggested that around 1 in 8 potential buyers are hoping to buy their first property with in the next 5 years.

However, the Council of Mortgage Lenders (CML) has also published data which shows that aspirations to own a property are much higher than current home ownership.

So with wages frozen , savings rates at rock bottom and house prices stubbornly high, how can a first time buyer hope to get on to the illusive property ladder!

 In the present climate saving money can be an insurmountable challenge, as current figures show that it can take the average first time buyer around 37 months to save a 10% deposit and this situation is only likely to get worse as a result of the Greek and Spanish economic crisis.

The average deposit for a first time buyer is approximately £29,343 and therefore this amount may feel like an enormous sum to many first time buyers, particularly when they have an average salary of just £32,111.

These deposit amounts are also particularly challenging to build up for first time buyers with rental costs being so high at the moment.

Experts do however feel for first time buyers and say that paying rent in the current climate at the same time as saving for a deposit can be really hard.

Fiannuala Earley,UKconsumer economist for the Royal Bank of Scotland (RBS) group said “escalating rental charges are making it virtually impossible to save a deposit”.

Therefore more and more young adults have moved back in with their parents in a bid to help them save up a decent deposit.

A report from the Office of National Statistics (ONS), suggests that there has been a 20% increase in young adults living with their parents over the past 15 years.

Many experts believe that a disciplined and goal based approach to savings works best, the key is to save little and often.

 First time buyers should sign up to a regular savings account, which will net them a high interest rate, lock away their money and they should use their tax free allowance to the full with a cash ISA.

However, there are still some banks that are offering good savings accounts. If savers can mange to put away £1,000 or more for 2 years, the Secure Trust and Co-op are offering rates of 3.76% and 3.75% (before tax) respectively.

Nationwide’s Save to Buy account offers an interest rate of 2.5% and the added chance to earn cash back if the saver successfully complete a Save to Buy mortgage. With this account there is also the opportunity to apply for a 95% mortgage.

It does seem then that serious saving is possible but it does take time and effort.

 



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