Cost of deposits surge as average house prices rise

First-time buyers must wait an additional nine months to save a further £3,541 towards their first home, thanks to house price inflation.

Analysis of ONS data by Moneybox shows that a typical buyer earning the national average wage and saving 20% of their net take-home pay in 2021 in an account paying 2.00% AER would take four and a half years to save a 10% deposit on a standard £228,000 home, up from 4.2 years in 2023. 

However, by that point, house price growth would have pushed the cost of that same home up by £37,250, meaning a £3,541 shortfall on their deposit and another nine months of saving just to catch up.

The cost of living (47%), rising house prices (39%) and rent eating up income (34%) are behind the increase, with 71% of aspiring FTBs now saying it will take them longer to save.

Changing plans

As a result, nearly two-thirds (63%) of FTBs have been forced to alter their buying plans. Nearly half (48%) have pushed back the date they expect to buy, 29% have settled for a less desirable location than planned and a further 29% have been forced to change their minds about property features they want – such as size, a garden or off-street parking.

Brian Byrnes, director of personal finance at Moneybox, said: “We speak to first-time buyers every day. Most are dedicated to their ambitions and saving habitually, but the frustration is obvious when it feels like the goalposts are constantly shifting. Even with interest rates working in their favour, house price growth is still edging ahead of the average saver.

He advised FTBs to consider the benefits of Lifetime ISAs and to set clear goals. “Revisit your savings goals regularly to make sure house price growth isn’t leaving you behind, but most importantly – don’t be disheartened. The gap is real, but it becomes more manageable once your savings are working effectively for you.”