Finance / Quarter of homebuyers pay a deposit of less than 10 per cent
Quarter of homebuyers pay a deposit of less than 10 per cent
10 August 2015
Small deposits are proving no obstacle when it comes to buying a home, with more than a quarter of buyers putting down less than 10% of their house price.
Data from Nottingham Building Society showed the average homebuyer had a deposit of 29% over the past year. This includes all buyers, rather than simply first-timers.
Of these, 48% did so with a deposit of less than 20%, while 27% put down less than 10% when buying.
One of the key reasons behind this is the proliferation of mortgages that allow people to borrow a high percentage of a home’s total value.
According to The Nottingham, the number of 90% and 95% Loan To Value (LTV) deals has jumped from around 325 in 2011 to 605 today.
Ian Gibbons, Nottingham Mortgage Services senior mortgage broking manager, said: “Homebuyers are demonstrating their commitment for a deposit as highlighted by the average 29% they are able to put down.
“Many will be using the equity they have built up in their home but it is also clear that people saving for deposits are succeeding in the market as well with nearly half of those putting down 20% or less.
“Securing a deposit is of course only the first step as buyers then need mortgages and prices can vary considerably depending on the LTV which is why searching the market is so important.”
For those hoping to buy in the future, The Nottingham suggested six tips for saving up a deposit
- Work out how much you need to save
- Start saving as soon as possible
- Estimate how long you think you will need to save for. Consider savings accounts that pay a higher rate – even if it means reducing access to your savings
- Keep an eye on the interest rate you are receiving on your savings, and be prepared to switch if you think you can find a better rate elsewhere
- To avoid paying tax on your deposit savings, use your annual ISA allowance first before saving in accounts where your interest is taxed
- Review your weekly spending – including transport costs – to see if there is anything you can cut back on, and use the money saved to top up your savings
Photo from Daniel Leal-Olivas / PA Wire