First-time buyers spend 111% of their income
First-time buyers are spending a record 111% of their annual income on a deposit and first year of mortgage payments, figures revealed yesterday.
The housing game: First-time buyers are being crippled by mortage payments
The massive financial burden is a result of the average size of a deposit rising to 24% - the largest amount ever required.
It means they are being asked to put down a deposit of around £30,000 to buy a property worth £128,000.
But once mortgage payments are added on top, this is more than the average first-time buyer's gross income of £33,300, according to economists at Citigroup.
'People just cannot afford the deposit, and the need to save for a deposit hits both housing demand and spending,' said Michael Saunders of Citigroup.
'A few years ago, first-time buyers would have gone to the Bank of Mum and Dad. But with the equity in their home falling, remortgaging is no longer an option.'
Citigroup based its analysis on depressing figures from the Council of Mortgage Lenders which said only 23,400 mortgages were approved in January, down from 32,400 in December and 48,600 in the same month a year ago.
The value of the loans agreed fell to £ 3.1bn, down by 29% from December and 59% year on year. The average 'loan to value' - the amount of a mortgage loan as a percentage of the value of the property - is now 76% for first-time buyers.
It is the size of a deposit needed that is the real stumbling block for first-time buyers, the CML said. Many lenders are demanding at least a 20% deposit, with some even asking for 40% to get the best deals.
In other respects, mortgages are becoming more affordable for first-time buyers because both house prices and interest rates have fallen. However, the size of the deposit means that only those first-time buyers who have been saving for years will be able to get a foot on the property ladder.
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Citigroup calculated that the total initial mortgage burden facing first-time buyers - the size of the deposit added to mortgage payments over the first year - has risen from 105 per cent of income in January, 61 per cent a year ago and a long-term average of 38 per cent.
A spokesman for the CML said: 'House prices may fall further still, which is one of the reasons lenders require larger deposits. Deposits provide borrowers with protection against falling house prices and negative equity.'
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