Four years ago, a first time buyer needed an average deposit of just £12,000, and some people got away with taking out a 100% mortgage, needing nothing.
Roll on another four years and that story is very different, with first time buyers now needing an average of £26,000.
That £26,000 is the equivalent of 87% of their median salary, more than double the 41% of a year’s wages required four years ago.
The Council of Mortgage lenders explained that the size of deposit was by far and away the biggest challenge facing potential first time buyers, with many able to afford the monthly repayments with ease.
Lenders are now demanding higher initial deposits as they worry that borrowers will default on their mortgages, due to the higher levels of unemployment in the country.
The CML explained, “We do not expect there to be a significant increase in first-time buyer activity in 2011 or 2012. The reality for first-time buyers is that, although there is widespread sympathy for their plight, they are only one of a number of different types of consumer who are experiencing difficulties in challenging housing and mortgage market conditions.”
As well as first time buyers, the report also looked at the overall picture, and found that a large reduction in gross mortgage lending for all borrowers was in evidence. The total mortgage lending in the UK has dropped three fold, from £363billion in 2007, to £136billion last year.
The CML added that they saw little prospect of recovery in the foreseeable future” and believed lending would sit still for this year.
Eight out of ten first time buyers under the age of 30 are only able to get on the housing ladder because they have received a cash handout from their mum and dad.