A typical first-time buyer can expect to save for almost a decade to afford a house deposit

Local independent financial adviser, Steve Embrey of LG Embrey Financial Planning looks at the savings pressure being felt by first-time buyers:  

The Nationwide Building Society has analysed its mortgage data and estimates that potential first-time buyers in Scotland will save for around eight years to afford a deposit for their first home.

Nowadays, following the introduction of stricter lending criterial since the financial crisis, Scottish first-time buyers are likely to be saving between £20,000 to £30,000 for their deposits.

This compares favourably to London where the same sector is typically spending 10 years to save around £80,000.

Earlier this year, the Financial Policy Committee’s (FPC) confirmed its decision to keep the affordability stress rate for mortgage customers at 3% despite criticism from advisers who feel many potential homeowners are being prevented from getting on the property ladder because of this.

However, the FPC said its decision to ensure that borrowers could still afford their mortgages if, over the first five years the Bank rate were to rise by 3%, would remain in place. As the 3% rule is applied to the lender’s Standard Variable Rate this often results in an applicant’s income being stressed at 7%.

Since then, the Bank of England has indicated that it would like to see this increase further.

Housing market experts have been vocal about the damage the stress rate has inflicted on first-time buyers’ chances of obtaining a mortgage. 

With base rates anticipated to stay low and with no sign of increasing significantly in the medium term, it’s disappointing to see that this can’t be recognised by lenders in the stress tests they use. Prudent lending is vital for the long-term sustainability of the mortgage market, but the inflexibility of this ruling continues to leave many borrowers out in the cold.

First-time buyers are being encouraged to get on to the housing market with stamp duty cuts on the first £300,000 for properties worth up to £500,000 implemented at the last budget.

An independent financial adviser is best placed to access the raft of products across the spectrum and will find the most appropriate product for each individual’s needs.

For more information on mortgages and schemes that can help home buyers, contact Steve on 01743 382002 or email info@lgembrey.co.uk