Planning and compromise the key to that first home
In financial services at Post Office, we spend a lot of time speaking with consumers to understand their needs. When it comes to first-time homebuyers, in the past we’ve spoken with them when they were well into their journey. Yet we’ve recently learned that a typical ‘FTB’ in Britain will spend up to four years saving for that all-important deposit, and making many sacrifices along the way. With the average deposit for a FTB home currently circa £50,000 – ranging from £22,000 in Blackpool to £173,000 in some parts of London – this is no easy feat, especially for younger buyers.
We know the market remains tough for many FTBs, because the gap between house prices and earnings has increased, and the availability of affordable housing is still an issue in parts of the country. Our goal is to help FTBs understand what the journey looks like, the hurdles they may face and the steps they can take to succeed.
From speaking with over 1,000 first-time buyers, the key to overcoming the first challenge, raising a deposit, is having a clear monthly savings goal and then making small but meaningful compromises that add up to significant savings. Most cut back on lifestyle luxuries such as holidays and nights out, many on essentials – everything from slimming down the weekly shop to moving into cheaper rented accommodation. And there are some that even move back in with family in an effort to get on the property ladder sooner! As a result, on average FTBs set and meet a household savings target of £800 per month.
But of course saving with such focus over a long period of time can be frustrating, and one in five successful FTBs admitted that their motivation to save waned over time. One in 10 even decided to give themselves a ‘savings holiday’ where they took a break from putting money aside. The important thing to note is that no matter the journey, each and every one of these people realised their goal and saved enough money to secure their first home.
When it came to choosing a property, compromise was also the key to success. More than half of recent first-time buyers settled in an area other than their originally intended location – on average, 29 minutes or five miles further afield. For example, in just one year, areas such Luton, Worcester and Northampton have seen a significant decrease in the amount of affordable properties for first-time buyers. But it’s not all doom and gloom.
We wanted to help FTBs plan their journey, and so developed a helpful online tool, the Post Office Deposit Planner. You select areas where you would like to live, and provide details of your income, any savings you have and how much you can afford to save each month. It will then tell you how long it will take to save a suitable deposit. It also suggests affordable areas nearby that you might want to explore if you would like to get on the properly ladder sooner.
It’s understandable that many might feel overwhelmed when considering how they can make their dream of home ownership a reality, but we’ve found that with a clear plan, and open mind and an understanding of the local housing market, it most definitely can be done.
Along with our range of mortgages developed specifically to help FTBs, we are really here for what matters when it comes to buying your first home.
Opinium Research carried out an online survey of 1,010 recent first-time buyers (those who purchased their property in the past 24 months) aged 18+ from 08 to 14 August 2018
Opinium Research was briefed by Post Office Money to conduct a study into the affordability of properties for first-time buyers in the UK, covering over 80 locations across the UK
The percentage of each city that is affordable to first time buyers was calculated by seeing what proportion of the middle layer super output areas (MSOA) in each local authority had a median house price lower than 4.5 times the average income of first-time buyers in each region.
Property price data sourced from the ONS House Price Statistics for Small Areas, quarterly statistics from the Registers of Scotland and the Northern Ireland Residential Property Price Index. Data on first time buyers’ salaries in each region sourced from the ONS House Price Index.