Average Homebuyer Deposit Rises to over £60,000, Finds Tesco Bank

In its second Home Buyers Survey, Tesco Bank has revealed that the average deposit needed to buy a home has risen to over £60,000.

Having assessed the finances of UK homebuyers, Tesco Bank found that most buyers wish to purchase a home to have an investment for the future, to provide security for their families and to be independent.

For most people, buying a home is the largest single transaction that they will ever make. Perhaps, then, it’s surprising that some homebuyers take a relatively short period of time to decide whether the house they are looking to buy is right for them.

In fact, Tesco Bank found that 28% of homebuyers decided to buy their new property on their first viewing, while the majority (78%) made the decision to buy in less than a week.

The study also revealed that the main reasons for moving home are financial, with 42% of customers saying that their move was motivated by the desire to build equity and provide security for the future (29%). Other reasons included a need to move to a bigger home, to move in with a partner or to start a family.

Tesco Bank’s data shows that the average mortgage taken out by UK homebuyers is currently £170,994, with the highest mortgages being borrowed in London and the lowest in Wales.

It was found that homebuyers save an average of over £500 per month to help them buy a property, rising to £844 in the capital. Rather worryingly, almost four in ten recent homebuyers had no savings left after they’d moved home.

But perhaps the most off-putting statistic for those looking to buy their own homes is the average deposit size, which now stands at £61,607. For those in London, the situation is much worse, with an average deposit of £90,685, while those in Wales are perhaps better off, with just £41,407 needed to buy a home.

Given this, it is unsurprising that the research also revealed the reliance that many homebuyers place on parents or family to climb the property ladder. Tesco Bank found that 40% of recent homebuyers received financial support from their family to purchase the property, with 65% of those receiving these funds as a gift.

Disturbingly, the study showed that reliance on family continues with age, with almost a fifth of customers in their 40s relying on help from their family to purchase a home.

And it’s not just deposits that are denting homebuyers’ finances. The report indicates that the financial pressure of a house purchase does not stop at the time of the purchase, and homebuyers’ spending habits continue to change in order to make repayments.

While it is encouraging that 45% don’t have to make cutbacks, 30% did have to reduce social spending, a quarter have reduced the number of holidays they take, while one in ten are working longer hours or taking on an additional job to meet their mortgage repayments on a new home.

As a potential interest rate hike is frequently in the news at present, Tesco Bank has asked homebuyers what an increase in interest rates would have on their household finances. The study revealed that a third of customers would have to reduce their discretionary spending to continue meeting their mortgage repayments if rates rose even slightly.

But a positive did arise out of the research, with Tesco Bank finding that the average homebuyer can save on their monthly repayments by ensuring that they remortgage at the end of their fixed-rate term when compared to the Standard Variable Rate (SVR). With a current average SVR of 4.39%, compared to a typical two-year fixed rate of 1.95%, customers could save £274 per month on their monthly repayments.

Despite the financial challenges that buying a new home can bring, positively, more than four in ten homebuyers feel more confident about their financial situation over the next year, while seven in ten were prepared for additional moving fees, such as Stamp Duty, legal fees, estate agent fees and removal costs.

Nevertheless, over a third of respondents reported experiencing a nasty surprise during the home buying process, including the unforeseen maintenance needed on the property, move-in dates changing or being delayed and additional costs or fees.

This highlights the importance of being prepared for any eventuality that can arise; being informed about the home buying process is key.

Landlords, could you offer any support to tenants who are trying to buy their first homes?