According to research from moneysupermarket, 16% of first time buyers are considering taking out a loan to cover the cost of the deposit; 25% have the deposit saved already; and a further 29% will rent until they can afford the deposit.
The good news is that as house prices continue to fall, the research fopund that 13% of 18-34 year olds are considering stepping on to the property ladder for the first time in the next 12 months.
Louise Cuming, head of mortgages at moneysupermarket.com said: "Taking out a loan to pay for a mortgage deposit is a dangerous move, and must be avoided even if it means you have to delay buying your first home. Anyone who takes a loan is effectively taking out a 100% mortgage through the back door. Not only will the mortgage lender decline the application if it discovers this is the source of the deposit but it is also a huge risk to the borrower - your monthly outgoings will be higher which means there is a greater chance of you finding yourself unable to keep up with repayments."
Some potential first time buyers are playing a waiting game with 14% hanging their hopes on property prices dropping further and six% banking on the fact that we'll see 100% mortgage deals return to the market.
Louise Cuming added: "It's easy to see why only 13% of under 34 year olds are planning to get on to the housing ladder at the moment. The need for such a high deposit is pricing many people out of the market. The obsession with equity that has gripped mortgage lenders over the last couple of years has hit first time buyers hardest. Lenders need to concentrate more on assessing the affordability of the mortgage on a case by case basis and less on the size of the deposit if they are serious about improving the mortgage market."
