Newgate in Housebuilder magazine: The devil’s in the deposit

The article below featured in the March edition of Housebuilder magazine.

Alex Reid, Newgate’s account director, conveys the frustration that young people such as him feel when trying to raise a deposit for a new home. He suggests some innovative solutions.

Alex ReidWe’re constantly talking about how important first time buyers are for the wider housing market, launching new schemes in an effort to get them onto the property ladder. But isn’t it time that we recognise that for the vast majority of first time buyers, raising the deposit in the first place is the real problem?

Halifax’s recent first time buyer review found average deposits had increased by 91 percent in the last ten years. First time buyers need to raise an average deposit of £33,000 nationwide, while in London that figure has risen to over £110,000. As wages languish and the cost of living continues to rise, it’s taking people years to get anywhere near these figures without other means of financial support.

I’ll turn 30 this year and as a Londoner the prospect of buying in the city does not even cross my mind. Instead, I’m thinking of how I’ll save enough to hopefully buy outside of London by my mid-thirties.

It’s incredibly frustrating being stuck in this Catch-22; throwing thousands away every year on rents knowing your mortgage repayments would be cheaper; but also knowing that raising the deposit is too far out of reach. It’s like sitting on the bench watching a game that you know you can play, forever waiting to come on.

Amongst my peer group it’s far rarer to meet a home owner than a renter. When the topic comes up in conversation amongst my own circle of friends, I often listen to bankers and lawyers telling me they rent because the deposits are too much for them.

So why haven’t the government, housebuilders and the mortgage industry done more to come together and think of a way around this? Surely it’s in their interests to unlock this potential too.

What if businesses attracted candidates by offering to pay an employee’s deposit instead of a bonus, with the quid pro quo that the employee offers their services to the company for a certain period of time? Or what if businesses could act as an employee’s guarantor?

We’ve got to make this part of the buying process more achievable. If we did then I’m sure we would unlock a wave of buying activity that would be of great benefit to the wider market.

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