UK first-time buyers need £11,000 larger deposits after COVID-19 property boom

Tom Belger
·Finance and policy reporter
·3 min read
A couple view properties for sale in an estate agents window in London, Britain August 22, 2016.  REUTERS/Peter Nicholls/File Photo
Rising property prices mean buyers need larger deposits. Photo: REUTERS/Peter Nicholls/File Photo.

First-time home buyers’ deposits jumped by almost £11,000 ($15,077) in the UK in 2020, as the pandemic fuelled surging property prices and tighter mortgage rules.

The average buyer last year had to stump up just over £57,000 for their first home, a 23% jump on the previous year.

Analysis by lender Halifax shows how deposit requirements surged across the UK, and how first-time buyer numbers fell after the market largely shut during the first nationwide lockdown.

An estimated 305,000 people got onto the ladder in 2020, down by more than 46,000 or 13% on the previous year.

London saw the lowest fall in first-time buyer numbers despite average deposits rising by 18% to an average of £130,357. Official data last week showed property prices in the capital exceeding £500,000 for the first time last November.

READ MORE: Average London house price surpasses £500,000

Wales saw one of the largest jumps, but property remains just a fraction of its cost in the capital. First-time buyers needed to fork out 25% more than a year earlier, with average deposits of just under £33,000.

Halifax estimates that first-time buyers made up half of all buyers last year, helping fuel a boom in sales and prices.

Watch: Property prices dip as race on to beat stamp duty deadline

Britain saw demand surge for house moves last year in the aftermath of the first nationwide lockdown. Analysts have highlighted not only pent-up demand but also new interest in moving after millions of households spent months at home and a boom in home working.

Cuts to stamp duty and equivalent land taxes across the UK triggered a further rush to move before the temporary holiday expires at the end of March 2021.

But many lenders have also withdrawn 5% and 10% deposit mortgages since the coronavirus struck. Banks demanded larger sums amid fears over buyers’ ability to repay loans during a severe economic downturn.

READ MORE: UK property prices fall as buyers struggle for time to beat stamp duty deadline

Some bank also sought to ease pressure on their own staff, with COVID-19 not only constraining their capacity but also pushing up demand for support from existing customers. Lenders were ordered to grant mortgage repayment holidays to struggling borrowers.

Russell Galley, managing director of Halifax, said: “Whilst these figures confirm the almost inevitable fall in the overall number of first-time buyers in 2020 – with the entire housing market effectively shuttered during the first national lockdown – they also underline just how strong the bounceback was in the second half of the year.

“However, with the economic impact of the pandemic likely to be felt most keenly by the young and those in lower-paid jobs, the need to prioritise improved housing availability and affordability for all those looking to make that first step on to the property ladder becomes ever greater.”