Mortgages

Here’s where 95% mortgages will benefit homebuyers the most

Olivia Morris
Authored by Olivia Morris
Posted: Thursday, April 29, 2021 - 09:21

Research from national UK estate agent, Keller Williams UK, has found that the ability to secure a mortgage with a five per cent deposit should reduce the time to save by over two years for some buyers across the UK property market.

Keller Williams UK analysed the current average house price across each area of the market, what this would require for both a 15% and 5% deposit, and how many months of net monthly income was required to save each deposit.

Benefit to British Homebuyers

The research shows that across Britain, it would currently require the average homebuyer to stump up 18 months of earnings (£2,105) in order to accumulate the £37,998 required for a 15% deposit on the current average house price of £253,323.

In contrast, a 5% deposit of just £12,666 would only require them to place six months earnings as a mortgage deposit, reducing the number of months required to save by a whole year.

By Region

The biggest benefit to homebuyers looking to utilise the 95% Government backed mortgage will be in London. With the average homebuyer earning £2,723, it currently requires 27 months of income to place a 15% deposit on the current average house price of £496,269. However, the ability to place just a 5% deposit means the income required reduces to just 9 months, a reduction of 18 months.

The South East and South West will also see some of the biggest reductions in the monthly earnings required to place a deposit, with both reducing by 15 months. The East of England (14), East Midlands (11), West Midlands (11), Wales (10), Yorkshire and the Humber (10) and North West (10) will also see a double digit reduction in the number of months income required to place a deposit.

Biggest Reductions in Britain

With London home to the largest regional reduction, it’s no surprise that the capital also accounts for some of the biggest reductions at local authority level. Currently, the average buyer in Westminster is required to place 39 months of average earnings to cover a 15% deposit on the average house price of £1,000,650. A five per cent deposit would see this required earnings reduce by over two years (26 months).

Camden (26), Haringey (25), Islington and Hackney (24) would also see the monthly earnings required to place a deposit reduce by more than two years.

Outside of London, Tandridge would see the average monthly earnings required to place a deposit fall by 12 months when comparing the requirement of a five per cent deposit to that of a 15% deposit, as would Epsom and Ewell.

CEO of Keller Williams UK, Ben Taylor, commented:

“While a stamp duty saving is currently a nice cherry on top for many homebuyers, the saving made pales in comparison to the initial financial hurdle of a mortgage deposit. So the ability to secure a Government backed mortgage with just a five per cent deposit should significantly boost buyer sentiment across the market.

It’s not just the sum required to take that first step onto the ladder that will see a notable reduction, but also the time it requires many to amass this sum. With aspirational homebuyers able to get on the ladder for less and at greater speed, a continued stream of buyer interest should keep the housing market buoyant from both a transaction and house price growth perspective, to say the least.”

Sources Gov.uk - UK House Price Index 15% of Average House Price 5% of Average House Price Net wage sourced from ONS - Employee earnings in the UK 15% deposit/Wage 5% deposit/Wage

Table shows the current average house price in each area, the 15% and 5% deposit requirement, the average net monthly income and the months income required to accumulate each deposit

Location

AveHP - Feb 2021

15% deposit

5% deposit

Average NET salary per month

Months earnings required for 15% deposit

Months earnings required for 5% deposit

Difference in months 15% vs 5% earnings required

London

£496,269

£74,440

£24,813

£2,723

27

9

18

South East

£345,075

£51,761

£17,254

£2,291

23

8

15

South West

£279,242

£41,886

£13,962

£1,892

22

7

15

East of England

£306,346

£45,952

£15,317

£2,182

21

7

14

East Midlands

£213,967

£32,095

£10,698

£1,946

16

5

11

West Midlands Region

£215,451

£32,318

£10,773

£1,972

16

5

11

Wales

£179,861

£26,979

£8,993

£1,824

15

5

10

Yorkshire and The Humber

£182,220

£27,333

£9,111

£1,897

14

5

10

North West

£184,351

£27,653

£9,218

£1,928

14

5

10

Scotland

£161,529

£24,229

£8,076

£2,004

12

4

8

North East

£138,370

£20,755

£6,918

£1,844

11

4

8

England

£268,291

£40,244

£13,415

£2,132

19

6

13

Great Britain

£253,323

£37,998

£12,666

£2,105

18

6

12

 

 

 

 

 

 

 

 

Table shows the areas to see the biggest reduction in the number of months earnings required to save between a 15% and 5% mortgage deposit

Location

AveHP - Feb 2021

15% deposit

5% deposit

Average NET salary per month

Months earnings required for 15% deposit

Months earnings required for 5% deposit

Difference in months 15% vs 5% earnings required

City of Westminster

£1,000,560

£150,084

£50,028

£3,807

39

13

26

Camden

£822,936

£123,440

£41,147

£3,227

38

13

26

Haringey

£567,352

£85,103

£28,368

£2,294

37

12

25

Islington

£700,791

£105,119

£35,040

£2,908

36

12

24

Hackney

£585,760

£87,864

£29,288

£2,482

35

12

24

Brent

£502,264

£75,340

£25,113

£2,196

34

11

23

Kensington and Chelsea

£1,220,511

£183,077

£61,026

£5,353

34

11

23

Barnet

£531,887

£79,783

£26,594

£2,478

32

11

21

Tandridge

£489,702

£73,455

£24,485

£2,312

32

11

21

Epsom and Ewell

£485,861

£72,879

£24,293

£2,301

32

11

21

 

 

           

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