The government’s Help to Buy scheme is scheduled to end by Q1 2017, with deposits likely returning to 20% for first-time buyers.
This could hit many hard, as only 18% of aspiring first-timers expect to get parental help, while a third (33%) have already given up hope in raising a deposit.
Simon Crone, vice president for mortgage insurance – Europe at Genworth, said: “Trying to buy your first home in the current climate is like chasing a runaway train.
“Even with good salaries that could comfortably support a mortgage, thousands of aspiring first-time buyers can only save modest sums – especially those who are already paying rent.
“This deposit trap is why many feel they are left with the all-or-nothing choice of borrowing from family or waving goodbye to ever owning a home.”
By Q1 2017 the average first-time buyer property will cost £173,308, meaning a 5% deposit would amount to £8,665 compared to £34,662 for a 20% deposit.
If £246 is saved per month – the average amount saved for aspiring first-time buyers – the 5% deposit could be reached in around three years, yet it would take 10 years to save for a 20% deposit.
House prices are set to rise faster than first-time buyers can save based on current Bank of England projections.
Crone added: “It is time to consider how an improved scheme to support high LTV activity can make affordable mortgages a long-term offer to first-time buyers while transferring risk from the taxpayer to the private sector.
“By implementing a coherent strategy well ahead of the end of Help to Buy, private mortgage insurers’ ability and appetite to take on this challenge can be confirmed.
“It would also allow the scheme to transition to the private sector gradually and smoothly during its current lifetime, with the private sector replacing the government by the scheme’s end.
“Failure to address this ahead of time could further damage home owning ambitions and cause disruption to the wider market.”
