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High costs, low savings prevent renters from buying own homes

October 25 2016

A triple whammy of high property prices, high rents and low interest rates on savings is preventing ‘wannabe home owners’ from getting onto the property ladder.

Research by comparison website money.co.uk shows that of the one thousand 18-34 years olds they surveyed, 53% can’t afford to save for a deposit because they are only just covering their current day-to-day living costs. A further 40% feel that they can’t buy a home on their own and need additional financial help.

  • With the average rent in the UK now £764 a month (and (£1,543 in London) many tenants are paying around half their income on rent, making it virtually impossible to save for a deposit on their own home. In London, rent accounts for 60% of incomes.
  • The average cost of a house has risen by £17,000 in the last year and now stands at £219,000. Between July and August alone the price went up by £3,000.
  • First time buyers pay an average of £161,900 for their home so need to save a deposit of around £8,000 to qualify for a 95% mortgage. With interest rates for savers at an all-time low, even if someone does manage to put money aside, it will take a very long time to build up any significant sum.

For those stuck in expensive rented accommodation home ownership may well seem like a ship sailing further and further away. In the research, 16% could only see themselves owning a home after an inheritance from a family member.

However, what the money.co.uk research did show was that many weren’t aware of other options to help them buy a home. Only 24% had heard of shared ownership schemes or Help to Buy ISAs and even fewer were planning to use them.

For anyone who feels that their dream of home ownership may simply never come true, it’s worth investigating all the available options:

  • Check the Government Help To Buy website for an explanation of the different Government schemes
  • Contact local housing associations for details of their shared ownership schemes
  • Council tenants may be eligible to buy their current home through Right To Buy

Be realistic about what you can afford and don’t expect your first home to be your dream home. Consider cheaper areas or buying a property that needs renovation (if you have the skills to do it yourself or with friends and family).

Or think outside the box and build your own!