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Despite speculation, first-time buyers were overlooked in March’s Budget. There were expectations that the government would announce some support for those trying to get on the property ladder, including rumours they would back a mortgage that required no deposit.

With the challenges first-time buyers face absent from chancellor Jeremy Hunt’s announcements, aspiring homeowners continue to face obstacles.

So, here are some steps that could help you overcome two of the biggest challenges of getting on the property ladder – saving a deposit and securing a mortgage.

The average first-time buyer saves £53,000 as a deposit

Saving a deposit to buy a home is often the first barrier aspiring homeowners face. As property prices have increased, so too has the amount an average first-time buyer needs.

According to a report in the Independent, the average first-time buyer saved more than £53,000 as a deposit at the start of 2024 – around 19% of the average purchase price. So, it’s no surprise that first-time buyers find they need to save for around a decade to achieve their goal.

If you’re in the process of saving a deposit, these three tips could be useful.

1. Check your local property market and set a clear goal

It’s important to note that the average deposit needed varies significantly across the country, with Londoners often needing to save far more than those in other regions. So, take some time to search property listings in the area you want to buy and understand what deposit you’re likely to need.

Traditionally, first-time buyers have put down a 10% deposit. However, there are mortgages available that require a 5% deposit, which could allow you to buy a property much sooner.

Keep in mind that putting down a larger deposit could mean you benefit from a lower interest rate and monthly repayments. As a result, in some cases, saving for longer could help you manage your finances better in the long run.

With a clear goal in mind, make your deposit savings part of your regular budget. Paying money into your savings account straightaway could reduce the temptation to use it on other expenses.

2. Boost your savings with a government bonus

If you’re aged between 18 and 39, opening a Lifetime ISA (LISA) could be a valuable way to save a property deposit.

In the 2024/25 tax year, you can deposit up to £4,000 in a LISA and you’ll benefit from a 25% government bonus. If you deposit the maximum amount, you’d receive a £1,000 boost to your deposit.

However, if you decide to withdraw money from your LISA for a purpose other than buying your first home before the age of 60, you’d pay a 25% penalty. This means you’d lose the bonus and a portion of your own money. So, you should think carefully about your plans and finances before deciding if a LISA is right for you.

You can choose between a Cash LISA, where your money would earn interest, and a Stocks and Shares LISA, where your deposit would be invested. You may want to consider your risk appetite and your saving time frame when deciding between the two LISA options.

While you can no longer open a Help to Buy ISA, you can continue paying into one until 30 November 2029 if you already have an account.

You can add up to £200 a month to a Help to Buy ISA and receive a 25% government bonus, up to a maximum of £3,000. You have until 1 December 2030 to claim your bonus, which you’ll receive if you buy a home for £250,000 or less (£450,000 In London).

3. Speak to your family about the support they could provide

As property prices have soared, more young people are relying on their families for support to help them get on the property ladder.

Indeed, Legal & General previously estimated that almost half of property purchases made in 2023 by someone under the age of 55 had family support. The most popular way to help first-time buyers was by directing funds towards a deposit as a gift or loan.

Providing financial assistance wasn’t the only way families helped either. Almost a third of parents and grandparents said they had welcomed adult family members to live with them to make saving a deposit easier.

So, speaking to your family might highlight ways they could help you take a step closer to your goal.

More than half of mortgage lenders have seen mortgage rejections rise

As interest rates have increased over the last two years, it’s perhaps not surprising that mortgage lenders are rejecting more applications. As a first-time buyer, navigating the mortgage market can be difficult.

According to a report in FTAdviser, in October 2023, almost 6 in 10 lenders said they were rejecting a greater number of applications due to people not meeting affordability criteria.

Usually, you can borrow between four and five times your annual salary through a mortgage. However, lenders will also assess how much risk you pose when reviewing your application.

As lenders set their own criteria, it can be difficult to know how likely your application is to be accepted. Working with a mortgage adviser could help you select a lender that’s right for you.

As a professional who understands the market and what lenders are looking for, we could also help you understand what steps you could take to improve your application and offer guidance throughout the process.

Please contact us if you’re a first-time buyer searching for a mortgage

If you’d like support during the mortgage application process, please contact us to speak to one of our team.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

You will incur a lifetime ISA government withdrawal charge (currently 25%) if you transfer the funds to a different ISA or withdraw the funds before age 60 and you may therefore get back less than you paid into a lifetime ISA.

By saving in a lifetime ISA instead of enrolling in, or contributing to an auto-enrolment pension scheme, occupational pension scheme, or personal pension scheme:

  • you may lose the benefit of contributions from your employer (if any) to that scheme; and
  • your current and future entitlement to means tested benefits (if any) may be affected.

Approver Quilter Financial Services Limited & Quilter Mortgage Planning Limited.  08/04/2024