First-time buyers will need gigantic £102,000 deposit to purchase a home

15 July 2023 , 21:30

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It's three times the typical level of deposit needed just a year ago (Image: Getty Images)

First-time buyers will need a £102,000 deposit to keep mortgage payments at the same level as a year ago, research has found.

Labour ’s analysis of government figures found rocketing interest rates are now likely to require three times the £30,000 figure people had to save just a year ago. Interest rates rose for the 13th time in a row last month, to 5% - the highest level since 2008. The Bank of England is expected to raise rates again on August 3.

Labour have slammed the Tories for failing to build enough houses during their 13 years in power. And they called for the government’s protections for mortgage holders struggling with their monthly payments to be made mandatory for all lenders.

The party pledged to make mortgage regulators require all lenders to bring in measures such as allowing borrowers to temporarily switch to interest-only payments, or lengthen the term of their mortgage period. Government plans were agreed directly with the biggest mortgage lenders, which means 25% - or 2 million households - could miss out on the protections.

“Across Britain, people are being hit hard by a Tory mortgage bombshell,” Shadow Chancellor Rachel Reeves said. “Unlike this government, Labour will not stand by as millions face a mortgage catastrophe made in Downing Street.

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“They haven’t just made life so much more expensive for mortgage holders and renters alike – now their continued failure to build more homes means the hopes and dreams of so many are destroyed.”

The average house price among UK first time buyers is £253,000, according to the latest figures from the Office for National Statistics. A year ago, the typical deposit for first time buyers was £30,000 - meaning they would borrow £223,000 on average.

At that point, interest rates on a two year fixed mortgage were 2.65% - which would mean an average monthly mortgage payment of £1,017. To achieve the same monthly payments this year, with comparable interest rates at 6.47%, would require a deposit of £102,000.

Ms Reeves added: “Labour’s mandatory plan to ease the Tory mortgage bombshell offers practical help now, while our commitment to fiscal responsibility and growth mission will secure our economy for the future.

"As the party of home ownership, Labour will build more homes, get more first time buyers on the housing ladder and give local people first dibs on homes in their area."

Mikey Smith