First-time buyers could get on the property ladder nearly four and a half years sooner if they were to check in to the Hotel of Mum and Dad, rather than going it alone in the rental market.
This is according to the latest research from award winning mortgage adviser Alexander Hall.
Alexander Hall looked at the time required to save for the average first-time buyer deposit across the UK based on tucking away a proportion of net income (20%) whilst renting, versus saving the average monthly cost of renting instead whilst living at home with mum and dad.
The latest government figures show that the average first-time buyer house price now stands at £245,208. This means that to step onto the property ladder, first-time buyers need to find a 15% deposit to the tune of £36,781 – a cost that has increased by 35% over the last eight years.
But it’s not just the increasing cost of a deposit that is presenting a barrier to homeownership for many first-time buyers. During the same time period, the average cost of renting has climbed by 34% to £1,307 and, whilst earnings have increased at a similar rate (35%), the average renter pays 41% of their gross monthly income in rent – climbing to 50% of their monthly net income.
And based on historic rents and earnings data, the analysis by Alexander Hall shows that it would have taken the average renter 85 months, or just over seven years, to accumulate the £36,781 required to place a mortgage deposit today when saving 20% of their net income each month.
However, had the same renter checked in to the Hotel of Mum and Dad and tucked away the average cost of monthly rent, they could have accumulated the same mortgage deposit in just 32 months.
Commenting on the research Alexander Hall director of partnerships Stephanie Daley said:
“Traditionally, the rental market has acted as the stepping stone to homeownership for the vast majority, but with both house prices and rents climbing at a phenomenal rate, many renters are now finding that they simply can’t make the jump.”
She added: “Not only is the task of saving a mortgage deposit a sizable one, but when combined with the high cost of renting, it can prove impossible.
So whilst living with your parents at a more mature age may not be ideal, it will likely mean you can get on the property ladder earlier.”
