First-time buyers look to second jobs and loans

Updated: 

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Aspiring first-time buyers are increasingly forced to take on second jobs, take out personal loans or club together with friends to raise money for a deposit on their first home.

With average housing deposits reaching £37,375 - 17% of property's value - a third of all non-homeowners believe they will never own a property.


However, one in four current non-homeowners say they are hoping to buy within the next five years, according to research from Santander Mortgages.

Over a quarter (28%) of hopeful first-time buyers say they will turn to second jobs or work overtime to get a deposit together, and a similar number (27%) are prepared to take on extra debt by taking out a personal loan to raise the money. This contrasts with current homeowners, who purchased their properties an average of 12 1/2 years ago, of which just 5% say they relied on overtime or a second job and 4% took out a loan to raise their deposits.

Savings (54%) remain the most popular way of funding a deposit but the proportion of potential buyers relying on inheritance money has almost doubled, moving from 8% for current homeowners to 14% for aspiring first time buyers.

Renting out a spare room (7%) and sharing the deposit payment with friends (6%) are also increasingly popular.

In the past, aspiring homeowners saved for an average of 29 months for their deposit, while today's first time buyers expect to save for around 40 months for theirs.

Phil Cliff, Director of Santander Mortgages, said: "The housing market is a tough place, particularly for first time buyers and with property prices averaging over £200,000 it's no wonder people are becoming increasingly resourceful when it comes to raising deposit. Despite a somewhat stagnant housing market, the mortgage market is actually very competitive, which is why it's vital that people shop around to ensure they are getting the best possible mortgage deal. £37,000 is a lot of money to find, particularly during these difficult economic times."

There are mortgage deals to be had, including Santander's latest 90% loan-to-value products. According to Moneyfacts, there are 84 mortgages at 90% LTV on the market at the moment, with an average rate of 4.97% (which compares with 5.3% six months ago). Some - including Skipton, Melton Mowbray and Cambridge building societies - even offer 95% mortgages, with rates ranging from 5.5% to 6%.

The bigger lenders are also getting in on the act. HSBC launched a range of fee-free mortgages with a maximum LTV of 90% last month, including a two-year fixed-rate loan at 4.49%, a five-year fix at 4.89% and a lifetime tracker at 4.09% above bank base rate.

Source of deposit finance

Current homeowners (who bought on average 12.5 years ago)

Aspiring homeowners who plan to buy within the next five years

Savings

43%

54%

Seeking additional work/overtime

5%

28%

Taking out a loan

4%

27%

Inheritance

8%

14%

Parents gifting me the money

6%

11%

Borrowing money from parents/siblings that I will pay back

4%

10%

Reducing holidays

3%

9%

Getting money from my parents/siblings that I will not pay back

2%

7%

Renting out a spare room

0%

7%

Sharing payment with friends

0%

6%

Buying with parents/siblings

2%

5%

Parents investing a percentage which I intend to pay back on sale

1%

5%

Selling/downsizing my car

1%

4%

Securing against my parent's property/income

1%

3%

Using credit card

1%

3%


Santander research 2011

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