New research suggests that first-time buyers could get on the property ladder nearly four and a half years sooner if they were to check in to the Hotel of Mum and Dad, rather than going it alone in the rental market.
Mortgage adviser Alexander Hall looked at the time required to save for the average first-time buyer deposit across Britain based on tucking away a proportion of net income (20%) whilst renting, versus saving the average monthly cost of renting instead whilst living at home with parents.
The latest government figures show that the average first-time buyer house price now sits at £245,208. This means that to secure that first foot on the ladder, first-time buyers need to stump at a 15% deposit to the tune of £36,781 – a cost that has increased by 35% over the last eight years.
During the same time period, the average cost of renting has climbed by 34% to £1,307 and, whilst earnings have increased at a similar rate (35%), the average renter pays 41% of their gross monthly income in rent – climbing to 50% of their monthly net income.
So what does this mean when it comes to making the jump between the rental market and homeownership?
Based on historic rents and earnings data, the analysis by Alexander Hall shows that it would have taken the average renter 85 months, or just over seven years, to accumulate the £36,781 required to place a mortgage deposit today when saving 20% of their net income each month.
However, had the same renter checked in to the Hotel of Mum and Dad and tucked away the average cost of monthly rent, they could have accumulated the same mortgage deposit in just 32 months.
That’s less than three years, meaning they could get that first foot on the ladder 4.4 years sooner than those renting.
A spokesperson for Alexander Hall says: “Traditionally, the rental market has acted as the stepping stone to homeownership for the vast majority, but with both house prices and rents climbing at a phenomenal rate, many renters are now finding that they simply can’t make the jump.
“Lenders understand how difficult it is to save for a deposit and we are now seeing some really good innovation at low deposit levels, such as Accords £5,000 deposit option and Skipton’s Track record 0% deposit mortgage for those who are renting.”