First-time buyers reduce energy use & going out to save for a deposit

• Rightmove’s new study reveals that determined first-time buyers are cutting back on going out and using as much gas and electricity to still be able to save up for a deposit:
  • The most common things they are cutting back spending on are going out, their levels of energy use, holidays, their food shop and streaming service subscriptions
  • The majority (86%) say they will use their savings to fund a deposit, with only 16% saying they will be getting help from a loan or gift from friends and family
  • The average time it is taking for a first-time buyer to save for a deposit is five years. The average monthly mortgage payment for someone taking out a two-year fixed mortgage at 90% Loan-to-Value (LTV) is now 41% higher than the average monthly rental payment, and 15% for a 75% LTV
• A three-bedroom semi-detached house is the most popular property type that first-time buyers are hoping to buy outside of London, while London first-time buyers have their sights set on a two-bedroom flat:
  • Energy costs, space to work from home and a spare room are more important to first-time buyers than more experienced buyers when choosing a home, and a garden and a garage are less important
• Although first-time buyer demand has eased following the economic uncertainty and abrupt mortgage rate hikes, it is still three-quarters of the exceptional levels of last year, and higher than 2019
• Now that mortgage rates have settled down, first-time buyers will be hoping that today’s Autumn budget doesn’t include anything that would significantly impact their ability to save

A new study from the UK’s biggest property website Rightmove reveals what aspiring first-time buyers are most likely to be cutting back on, to be able to continue saving for their deposit.

Despite affordability concerns, would-be first-time buyers are making lifestyle changes to be able to save more of their income towards a deposit on a first home.

Reducing spending on going out (72%), using less gas and electricity at home (55%), spending less on holidays (49%), cutting the amount they spend on a food shop (48%) and cancelling subscription services such as Netflix and Amazon Prime (35%) are the most common ways first-time buyers are cutting back to save more towards a deposit.

Further emphasising the importance of saving as much as possible, only 16% of aspiring first-time buyers said all or part of their deposit would be raised by getting a loan or a gift from friends and family.

The study found that on average, it is taking a first-time buyer five years to save up their deposit. Meanwhile, the average monthly mortgage payment for a new first-time buyer taking out a two-year fixed mortgage at 90% Loan-to-Value (LTV) is now £1,324, 41% higher than the average monthly rental payment of £940 following mortgage interest rate rises.

The average monthly mortgage payment for new first-time buyers taking out a 75% LTV mortgage is £1,082, which is 15% higher than the equivalent average monthly rental payment, highlighting the difference in monthly payments for those that can afford to save up a bigger deposit.

The first-time buyer study also looked at what is most important to first-time buyers when purchasing their first home. A three-bedroom semi-detached house is the most popular property type that first-time buyers are hoping to buy outside of London, while London first-time buyers have their sights set on a two-bedroom flat.

Though first-time buyers and more experienced buyers value similar features in a home, first-time buyers placed more emphasis on energy costs, a spare room and space to work from home. Experienced buyers prioritised a garden more than first-time buyers, as well as a parking space and garage.

Demand in the first-time buyer sector is down 26% compared to the frenetic market of last year. However, this also means that despite the many economic challenges, first-time buyer demand is still three-quarters of last year’s level in what was an exceptional market.

First-time buyer demand is still 4% higher than 2019, before two and a half years of a market frenzy.

Tim Bannister, Rightmove’s property expert comments: “The sudden nature of mortgage interest rate increases has meant that first-time buyers have had to very quickly reassess their position. For example, those who already had a mortgage offer in place are trying to rush through their purchase to keep their lower rate. Many of those who had not yet secured an offer and found that the monthly repayments they would pay on a mortgage were a lot more expensive than planned, either had to budget for the extra costs, look for a cheaper property and borrow less, or pause their plans altogether.

“Now that mortgage rates have started to settle down, first-time buyers will be hoping that there are no surprises in today’s Autumn budget, and they can begin to get some longer-term assurance and financial certainty after what has been a turbulent and very uncertain two months.

“Despite the many significant challenges facing first-time buyers at the moment, the fact that demand in the sector is still above the last normal market of 2019 shows that there are many motivated first-time buyers right now who are still determined to get onto the ladder. For those without their deposit saved yet, the results of our first-time buyer study indicate that buying a first home remains very important to people. They are not being put off saving due to the current economic climate, and instead are making decisions in order to save as much as they can towards a deposit.”

Actions taken to keep saving towards a deposit

What is most important to home-buyers

Notes to editor

For further information please contact Jamie McLean on 07527 995286 or email jamie.mclean@rightmove.co.uk