Four-year wait for a home

FIRST-TIME buyers are forced to save a year longer for a house deposit than they were a decade ago, according to new research.

Since 1994, the time it takes to save for a 5% deposit on a first home has increased from two years and nine months to three years and nine months.

National Savings & Investments, which undertook the research, says the change is largely due to salaries increasing only 68% against a 142% rise in property values.

Government figures show the value of the average UK home rose from £49,000 in 1994 to £118,000 at the beginning of 2004, NS&I said.

'The growing gap between increases in house prices and incomes means that those thinking about buying homes for the first time need to start saving earlier,' said Gill Cattanach, marketing director at NS&I.

The study also revealed that saving time had grown most in East Anglia where it takes 45 months to save for an average deposit compared to 30 months 10 years ago.

However, buyers in the capital will be surprised to learn they are not worst off - it takes 45 months to draw together a typical deposit in London but 48 months in the South East outside London. Buyers in East Anglia are facing an equal struggle to Londoners.

John Wriglesworth, an analyst at property information firm Hometrack, said: 'It is not surprising that many potential buyers are feeling compelled to take out even larger 100% mortgages or self-certification mortgages, which are typically much more expensive then standard ones. Some first-time buyers are even taking out unsecured loans in order to afford a deposit.'

But he added: 'In many cases, buyers are not properly assessing the true long-term costs of the higher rate loans against the advantages of saving longer for a deposit which will enable them to obtain a much cheaper mortgage.'

Calculations were based on savers tucking away 5% of their income – equivalent to around £130 a month for the average UK first-time buyer who, according to Government figures, earns £31,000 a year.