A new study from Rightmove has revealed what aspiring first-time buyers are most likely to be cutting back on, to be able to continue saving for their deposit.
According to the findings, reducing spending on going out (72%), using less gas and electricity at home (55%), spending less on holidays (49%), cutting the amount they spend on a food shop (48%) and cancelling subscription services such as Netflix and Amazon Prime (35%) are the most common ways first-time buyers are cutting back to save more towards a deposit.
Further emphasising the importance of saving as much as possible, only 16% of aspiring first-time buyers said all or part of their deposit would be raised by getting a loan or a gift from friends and family.
The study found that on average, it is taking a first-time buyer five years to save up their deposit. Meanwhile, the average monthly mortgage payment for a new first-time buyer taking out a two-year fixed mortgage at 90% Loan-to-Value (LTV) is now £1,324, 41% higher than the average monthly rental payment of £940 following mortgage interest rate rises.
The average monthly mortgage payment for new first-time buyers taking out a 75% LTV mortgage is £1,082, which is 15% higher than the equivalent average monthly rental payment, highlighting the difference in monthly payments for those that can afford to save up a bigger deposit.
The first-time buyer study also looked at what is most important to first-time buyers when purchasing their first home. A three-bedroom semi-detached house is the most popular property type that first-time buyers are hoping to buy outside of London, while London first-time buyers have their sights set on a two-bedroom flat.
Though first-time buyers and more experienced buyers value similar features in a home, first-time buyers placed more emphasis on energy costs, a spare room and space to work from home. Experienced buyers prioritised a garden more than first-time buyers, as well as a parking space and garage.
Demand in the first-time buyer sector is down 26% compared to the frenetic market of last year. However, this also means that despite the many economic challenges, first-time buyer demand is still three-quarters of last year’s level in what was an exceptional market. First-time buyer demand is still 4% higher than in 2019, before two and a half years of a market frenzy.
Tim Bannister, Rightmove’s property expert, comments: “The sudden nature of mortgage interest rate increases has meant that first-time buyers have had to very quickly reassess their position. For example, those who already had a mortgage offer in place are trying to rush through their purchase to keep their lower rate. Many of those who had not yet secured an offer and found that the monthly repayments they would pay on a mortgage were a lot more expensive than planned, either had to budget for the extra costs, look for a cheaper property and borrow less, or pause their plans altogether.
“Now that mortgage rates have started to settle down, first-time buyers will be hoping that there are no surprises in today’s Autumn budget, and they can begin to get some longer-term assurance and financial certainty after what has been a turbulent and very uncertain two months.
“Despite the many significant challenges facing first-time buyers at the moment, the fact that demand in the sector is still above the last normal market of 2019 shows that there are many motivated first-time buyers right now who are still determined to get onto the ladder. For those without their deposit saved yet, the results of our first-time buyer study indicate that buying a first home remains very important to people.
"They are not being put off saving due to the current economic climate, and instead are making decisions in order to save as much as they can towards a deposit.”
