What is the average deposit for a first-time buyer?

First-time buyer deposits have risen on average five-fold since the last 1990s from £10,000 to £50,000 – so renting is the only option now for a growing number of young people, according to the report. Even if a home is at the lower end of the market, saving a deposit is a major hurdle.

Senior PwC economist Richard Snook explained how a decade of rising house prices before the great global financial crisis and lower loan-to-value loans after it, meant deposits needed by first-time buyers have increased steeply.

In London, where properties are much more expensive, deposits for first-time buyers hit the £100,000 mark in 2016, pricing many out of the market completely.

The rise in average deposits now far outstrips average increase in earnings and this shuts young people on middle to low incomes out of the property market. Deposits are highest in London and the south-east and lowest in the north-east and north-west.

How many people are now renting?

The proportion of people aged 20 to 39 renting privately is expected to jump from 20 per cent in 2000 to about 50 per cent by 2025, the PwC study found.

The economists predict housing prices will rise by about five per cent per year for the rest of the decade, assuming house supply continues to be “sluggish.” As housing prices have risen and social housing remains limited, the number of households in the private rented sector has more than doubled since 2001, rising from 2.3 million to 5.4 million by 2017. The economists predict this trend will continue with an extra 1.8 million households renting privately by 2025. This brings the total to 7.2 million, about 25 per cent of the UK total. The trend is particularly strong for 20-39 age group where they estimate about half will be private renters by 2025.

Chief PwC economist, John Hawksworth, said: “We expect housing supply shortages to persist for at least the next decade and realistically expect to see a continuing rise in ‘Generation Rent’ until at least 2025.”

The study says limited housing supply, affordability and mortgage availability make it harder for first time buyers to get on the housing ladder.

What is happening to the first-time buyer market?

First time buyers make up nearly half of all house purchases financed with a mortgage despite the above. During the first half of 2017, some 47 per cent of all house purchases with a mortgage were by first-time buyers, according to a separate study by Halifax. Housing schemes such as Help to Buy (add link to updated HMP article), Shared Ownership and Right to Buy together with cheaper mortgage have helped boost the first-time buyer market.

The Halifax First Time Buyer Review found those taking the first step on the property ladder need to put down a £33,000 deposit on average.  In London, the figure was typically £106,577. The average price for a first home is at a record high of £207,693, Halifax found.

There is evidence those buying their first home are stretching their mortgages out longer than the traditional 25 years to afford the higher property prices. In 2016, about 60 per cent of mortgage loans were for between 25 and 35 years.

Why are there so many first-time buyers?

Support from the bank of mum and dad, record-low mortgage rates, high employment and tax hikes in the private rented sector, including an additional three per cent surcharge on stamp duty, to free up properties for first time buyers have helped.

What schemes are there to help first-time buyers?

There are schemes to help first time buyers, including Help to Buy mortgages (link to HMP article), Shared Ownership and Right to Buy which have helped first-time buyers get a foot on the housing ladder. But a report from the Social Mobility Commission and London School of Economics, suggests these schemes are mostly being taken up by better-off people. 

The Social Mobility Commission has published research showing a third of first-time buyers have turned to their parents for help to save for a deposit.

Among 25-29-year olds, home ownership has fallen by more than a half over the last 25 years from 63 per cent in 1990 to 31 per cent recently. The Rt Hon Alan Milburn, chair of the Social Mobility Commission, said: “Changes to existing schemes are needed if they are to do more to help more lower income young people and families become owner-occupiers. Without radical action, particularly on housing supply, the aspiration that millions of ordinary people have to own their own homes will be thwarted.”