New first time buyer deposit saver account (Source: www.co-operativebank.co.uk)
Perhaps the biggest stumbling block for first time buyers when considering flying the parent’s nest or finally getting out of the generation rent cycle. How much deposit do you need as a first time buyer, and how are you supposed to save a deposit in this day and age? Over the years there have been countless schemes and initiatives from lenders, aimed at helping borrowers to save a first time buyer deposit. Schemes like the help to buy ISA scheme. But unfortunately, due to the rising cost of living, the inability to save money per month like people could in the past, and the lack of pay increases for young professionals, saving a deposit can be tricky. Coventry building society have today announced a new savings account for first time buyers which should help thousands to at least start their property purchase journey.
First Time Buyers In 2023
In 2022, the average age of a first time buyer in the UK was 32 with the average first time buyer house price at £236,783. The average deposit was also £61,000. In London, where we are based, the average age of a first time buyer is 34, the average first time buyer property is valued at £453,778 and the average deposit is a whopping £150,000. For most people, this is an unachievable feat to accomplish, however these are just averages and there are still plenty of deposit opportunities lower than this. The most important thing to remember when it comes to deposits, is how much mortgage you can actually borrow.
How Much Deposit Do First Time Buyers Need?
Generally, mortgage lenders will be willing to lend up to 4.4X salary or income as a mortgage. So if you earn £35,000 a year a mortgage lender could potentially let you borrow up to £157,500. For some people who earn higher salaries (e.g. £75K+) a mortgage lender can lend 5X or even 5.5X salary for a mortgage. The next thing to remember is you need to put down a minimum deposit amount too.
The absolute minimum deposit that any mortgage lender will accept in the UK is 5% however most lenders will offer 10% or 15% deposit mortgages and the more deposit you can contribute, the lower your mortgage interest rates will generally be. So, hypothetically a first time buyer could purchase a flat at £300,000 in London with a 5% deposit which would be as low as £15,000. They would then need a 95% mortgage of £285,000. As long as the borrower(s) income is high enough for the mortgage lender to borrow £285,000 (at least £64,000 sole or jointly) then this purchase would potentially be affordable.
Coventry Building Society First Time Buyer Savings Account
In a communication released today, Coventry BS have announced a new savings account, designed specifically at helping first time buyers to save a deposit. The new first time buyer savings account has a 4% interest rate and will allow savers to put away a maximum of £1,000 a month over a period of three years. That is up to £36,000 that you can potentially contribute yourself, plus the interest earned too. The money can be withdrawn however you will need to provide the building society with a 60-day notice period before you do it, otherwise you could face a penalty.
Of course, not everyone will be able to save £1,000 a month but even the smallest amount that can be contributed will gain interest and will eventually make a nice lump sum contribution to your deposit. Coventry have also specified that at the end of the three year saving period, the first time buyer deposit saver account and all money saved will automatically transfer to an easy-access account. The building society will also offer £500 cashback to any first-time buyer who goes on to purchase with a Coventry mortgage within five years of the savings account being opened.
First Time Buyer Mortgage Broker London
Being based in London, we know how tricky getting on the property ladder can be. But don’t worry, we are experts and our job is to help you get the dream property you need. Get an idea of how much you could potentially borrow for a mortgage by using our handy calculator. Read our First-Time Home Buyer Questions To Ask A Mortgage Broker or contact our Putney mortgage team today to see how we can help you make your dream of home ownership a reality.
