Deposits

Government schemes need to recognise that for many aspirant first time buyers, saving for a deposit is a greater problem than meeting mortgage payments.

Rises in property prices have been accompanied by increases in rents. As a consequence, rents are now often higher than a monthly mortgage payment would be, which can make it difficult for a potential first time buyer to save the considerable sum that is required as a deposit.

Yet the Government schemes fail to recognise that many people who are unable to buy could easily meet the mortgage repayments, but, since rents are so high, are unable to save for a deposit. The Government schemes concentrate on reducing the monthly mortgage repayment, but offer no help to potential first time buyers to raise a deposit.

Building societies have responded to this problem by providing, in carefully selected circumstances, 100% mortgages (which do not require a deposit) or alternatively by allowing a parent or other relative or friend to act as guarantor or to provide the deposit themselves. Several have also allowed larger groups of people to be included on a mortgage than the traditional two, allowing people to pool their savings.

However, despite this, the Government’s schemes do little to address the problems first time buyers face in raising a deposit. If they did, then more people could participate in the schemes and benefit from owning a home.