Owning a home may feel out of reach for millennials, but research has found there are 14 British cities where it’s possible to save a 5 per cent mortgage deposit in under a year.
Research conducted by Compare My Move looked into how long it would take young renters around the country to save up for a deposit with and without the aid of a Help to Buy equity loan – with the results proving that it changes wildly from place to place.
The study looked at the average regional wage for 22 to 29-year olds and worked out their average take-home salary by deducting tax, pension contributions as well as student loan contributions.
Based on this income and average rents in each region, they found 14 cities across the UK where it would take less than a year to save a 5 per cent deposit – all that’s needed to purchase a home with the aid of Help to Buy.
Map showing the time it takes for young renters to save up a Help to Buy deposit around the UK
Burnley locals can get on the property ladder the quickest with house prices in the Lancashire town averaging just £69,571.
According to Compare My Move, it would take Burnley first-time buyers just seven months to save the 5 per cent deposit which is needed for Help to Buy.
Even those not wishing to take advantage of the Government scheme would take only one year and seven months to save enough for a standard 15 per cent deposit required by many mortgage lenders.
Renters in Dundee and Hull will only have to save up for eight and nine months respectively before they are able to stump up the cash for the 5 per cent Help to Buy deposit. The average house price in the Scottish city is just £99,984 while in Hull in the north east, buyers can bag a property for an average £98,509.
But it’s not that easy for everyone. Those in Oxford have the hardest time to save, with the research showing it would take five years and eight months to save a 5 per cent deposit in the city, where house prices are among the highest in the country.
First-time buyers needing to save 15 per cent would take a whopping 17 years to hit their target £53,000. Within that time, Compare My Move claims prospective buyers will pay a staggering £115,000 in rent.
Those renting in London, Reading and Cambridge all have to wait on average more than a decade to save the 15 per cent needed to put a deposit on a home, with high property prices and rental costs in these areas far outstripping the average salary, making it even harder to get on the property ladder.
|City||Avg 15% FTB Deposit||Years to Save 15%||Avg 5% FTB Deposit||Months to Save 5%|
|Burnley||£10,435.66||1 Years and 9 Months||£3,478.55||7 Months|
|Dundee||£14,997.65||1 Years and 10 Months||£4,999.22||8 Months|
|Hull||£14,776.40||2 Years and 3 Months||£4,925.47||9 Months|
|Sunderland||£14,929.71||2 Years and 4 Months||£4,976.57||10 Months|
|Blackpool||£14,305.78||2 Years and 5 Months||£4,768.59||10 Months|
|Liverpool||£17,026.14||2 Years and 5 Months||£5,675.38||10 Months|
|Glasgow||£17,168.22||2 Years and 6 Months||£5,722.74||10 Months|
|Preston||£16,098.00||2 Years and 6 Months||£5,366.00||10 Months|
|Doncaster||£16,590.79||2 Years and 7 Months||£5,530.26||11 Months|
|Huddersfield||£18,927.01||2 Years and 7 Months||£6,309.00||11 Months|
|Source: Compare My Move|
How does Help to Buy help?
The Help to Buy equity loan, introduced in 2013, sees the government lend buyers up to 20 per cent for the cost of their new home, meaning that you need a 5 per cent cash deposit and a 75 per cent mortgage to complete the rest of the purchase.
Buyers are not charged fees on the 20 per cent equity loan until after the first five years of owning the home.
According to the Compare My Move study, the scheme can help would-be homeowners buy around two years sooner on average than if they wait to save a full 15 per cent deposit.
Savers in expensive areas benefit most from the Help to Buy scheme with Londoners able to take seven years off their renting lives by taking out the loan.
Compare My Move Co-Founder, Dave Sayce, said: ‘Our research shines a light on the struggle many young renters face in getting together a deposit for their first home.
‘In many cities it’s a race against rent to save a deposit as a prospective first-time buyer. In cities and towns where rent greatly outstrips the national average, it can take more than a decade for renters in their 20s to save up a 15 per cent deposit.
‘It’s clear from our research that the Help to Buy scheme acts as an important catalyst for getting renters on the property ladder, and its extension to 2023 in the recent budget will act as a lifeline to generation rent.’
|City||Avg 15% FTB Deposit||Years To Save 15%||Avg 5% FTB Deposit||Years To Save 5%|
|Southend-on-sea||£35,767.50||5 Years and 9 Months||£11,922.50||1 Years and 11 Months|
|Swindon||£28,145.85||6 Years and 1 Months||£9,381.95||2 Years and 1 Months|
|Bristol||£37,861.78||7 Years and 8 Months||£12,620.59||2 Years and 7 Months|
|Crawley||£38,324.16||9 Years and 2 Months||£12,774.72||3 Years and 1 Months|
|Slough||£41,711.53||9 Years and 5 Months||£13,903.84||3 Years and 2 Months|
|London||£63,070.67||10 Years and 7 Months||£21,023.56||3 Years and 7 Months|
|Reading||£41,147.76||10 Years and 8 Months||£13,715.92||3 Years and 7 Months|
|Cambridge||£55,551.55||14 Years and 3 Months||£18,517.18||4 Years and 9 Months|
|Oxford||£53,105.08||16 Years and 12 Months||£17,701.69||5 Years and 8 Months|
|Source: Compare My Move|
The study also revealed that the average first-time buyer in the UK pays £15,000 in rent while saving up for a 15 per cent deposit of £17,000.
By contrast they spend £5,000 in rent during the time it takes to save the average 5 per cent deposit of £5,670 – proving that the quicker millennials are able to get on the housing ladder, the cheaper it is for them.
This is due to low house prices and reasonable rent costs in these areas which are relative to the average salary.
Despite its advantages, there has been some controversy as to whether Help to Buy is a good idea or not.
One of the main arguments against the scheme is that, as the government holds a 20 per cent stake in your property until you pay off the loan, it reaps the rewards if a house goes up in value.
Whether the increase in value is due to home renovations or changes in the property market, buyers could end up paying back thousands of pounds more than they originally borrowed.
Another concern is that the introduction of the scheme has driven up house prices as it is not currently restricted to first-time buyers. Anecdotally, it has been suggested that some people took out the loans to make home improvements as opposed to getting their foot on the property ladder.
It was announced last month that the scheme is to be extended to 2023, however, from April 2021, this will be just for first-time buyers, narrowing the scope of the scheme somewhat.
There will also be the introduction of regional price caps, which will drastically reduce the maximum value of homes that can be bought with the scheme’s help.