Mortgage Advice: Deposit Still Crucial for First-time Buyers

The Bank of England announced on Thursday that they would be pumping an extra £50bn into the UK economy as part of their quantitative easing programme. Unfortunately for first-time buyers, this may not help to make mortgage deals more attainable, according to money comparison site CreditChoices.co.uk.

Despite a current total of £175 billion in quantitative easing, mortgage deals are still limited for buyers with a mortgage deposit of less than 25% of the price of the property. Recent figures from the Council of Mortgage lenders showed first-time buyers are stumping up an average deposit of £32,000 to climb the first rung of the property ladder.

Chris Eagle, commercial manager of CreditChoices.co.uk, said: 'Quantitative easing has not yet had a noticeable effect on the mortgage market and most first-time buyers are still struggling to raise a enough of a deposit to purchase a property. However, there are a number of steps first-time buyers can take to help build up the necessary deposit.'

Top tips from CreditChoices.co.uk on how to save for a mortgage deposit:

1) Use other savings

Chris Eagle recommends dipping into other savings: 'If you have savings separate from your deposit then it may make sense to use these to boost your deposit,' he says. 'The money you will save by getting a better interest rate on your mortgage is likely to outweigh any returns you are currently getting on cash in a savings account.'

2) Get better returns

You need to think carefully about where to put your money while you save, says Eagle. 'While you are saving up for your deposit, make sure your cash is earning as much interest as possible', he says. 'Savings interest rates are not great at the moment but there are always accounts that beat the rest.'

3) Spend less

Budgeting is crucial to maximising your saving power, says Eagle. 'Cutting back in the short-term will help you achieve your long-term goal of owning your own house,' he says.

4) Ask for help

Help from family is often vital for first-time buyers, says Eagle. 'Now more than ever, help from parents, family or friends can be make-or-break for first-time buyers', he says.

Eagle advises setting out a careful plan with your lenders, even if they are close family, to prevent trouble further down the line. 'You should always agree in advance how you will pay back the loan,' he says. 'Look carefully at whether you will be able to repay it in a reasonable time, and put everything in writing with a copy for both parties.'

5) Get a loan

An unsecured loan which boosts your deposit could get you a better mortgage deal, says Eagle. 'Just make sure you get your sums right and that it is cheaper than getting a mortgage without it. Also remember to include loan repayments into your calculations for monthly repayments.'

6) Speak to an expert

It's important to get all the facts and to compare mortgages, says Eagle, as you may find there are mortgage options you had never thought about.

'Speak to an expert', he says. 'If you are struggling to build up a large mortgage deposit, there may be specific options you can consider, such as part-ownership mortgages, graduate mortgages, guarantor mortgages and government-assisted mortgages.'

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