First-time buyers increasingly need to borrow

Two-thirds of first-time buyers plan to borrow money to raise the cash needed for their mortgage deposit, research claimed today.

About 47% of people hoping to get on the property ladder hope to borrow their deposit from a bank or building society, according to the Association of Investment Trust Companies.

But while some will turn to their bank manager for help, 19% of people plan to ask their parents for the money - rising to 38% among adults aged 16 to 34 years old.

The group found that 15% of all adults in the UK said buying their first home was their top financial priority, with this figure rising to 24% among 25- to 34-year-olds.

But despite this only 52% of prospective buyers are currently saving, and more than half of people hoping to get on the property ladder think they will need to save for five years to have a large enough deposit, while 28% hope to accumulate it within two years.

Among current homeowners 24% said they had borrowed their deposit from the bank or building society, while 10% admitted they had turned to their parents for help.

However, 56% saved the money to go towards buying their first home over a number of years, with 48% taking two years to raise the cash and 66% taking five years.

One in four people put down a deposit of up to 5% on their new home, while 18% managed a deposit of between 6% and 10%.

But a quarter of all homeowners said with hindsight they wished they had put down a bigger deposit on their mortgage, which would have reduced their monthly repayments.

Annabel Brodie Smith, communications director of the AITC, said: "Buying property is a huge financial commitment.

"If you can put down a large deposit then you can either afford a larger property or negotiate a better mortgage deal with cheaper repayments.

"First time buyers often don't understand how the extra bills can mount up - council tax, utilities, life assurance, buildings and content insurance - it goes on and on.

"Why saddle yourself with more debt when, with a bit of thought, you could avoid it?"