London first time buyers could take 10 years to save for a deposit

New analysis by the Nationwide has revealed just how big an obstacle a 20 per cent deposit can be for buyers in much of the country. 

Using regional income data, the presumption that a first timer would have to put down a 20 per cent deposit, and the expectation that lenders would not allow a mortgage of more than four times their single income, the building society shows how the picture varies across the UK.

The picture that emerges is that this ‘typical buyer’ moves up the income spectrum as you move from the north to the south. 

“A 20 per cent deposit in London is now in excess of £80,000 based on the average first time buyer house price. This is around £30,000 higher than a decade ago” according to the Nationwide’s chief economist, Robert Gardner.

“In other regions, such as the Midlands and Northern England, deposit requirements are similar to 2007, though it should be noted house prices were at or near their pre-crisis peak at this time” he adds

Gardner says it is arguably more challenging now to save for a deposit than it was a decade ago, due to falling real earnings - after taking account of inflation - plus lower interest rates for savers. 

Based on the presumption that a first time buyer would save around 15 per cent of their take home pay, Gardner says:“In most regions, it would take around eight years for the typical buyer to save for a deposit. This rises to nine years in the South East and to nearly 10 years in London, even though the prospective typical buyer in the capital is in the top 10 per cent of the income distribution.”

Yesterday we reported that Nationwide's house price index had shown the first annual fall in London-wide prices for eight years.