A new government-backed deposit scheme could help up to one million first-time buyers onto the housing ladder as affordability pressures continue to lock out working households.
Analysis from the Resolution Foundation highlights the growing divide in home ownership, with low- and middle-income families seeing the sharpest declines since 2008.
The report identifies deposit requirements as the biggest barrier. While around half of the UK’s eight million ‘potential’ first-time buyers could afford mortgage repayments, just 15% are able to raise the upfront deposit needed to secure a home.
Saving remains a major hurdle, with a typical buyer needing five years to build a 5% deposit. For 1.7 million households, that timeframe stretches beyond a decade, increasing reliance on family support and widening inequality.
STARTER DEPOSIT
The think tank is proposing a targeted ‘Starter Deposit’ equity loan scheme, where government would fund a 5% deposit, supplemented by a contribution of up to £3,000 from buyers.
Under the model, support would be capped based on lower-quartile house prices in each region, focusing on more affordable homes and avoiding the inflationary pressures associated with previous schemes such as Help to Buy.
Simon Pittaway, senior economist at the Resolution Foundation, says: “The dream of owning a home is a distant one for many people today, with home ownership rates falling particularly fast for low-and-middle-income families.
“The main barrier to home ownership is finding a deposit in today’s world of sky-high house prices. Building more homes in the right places is needed to relieve this underlying price pressure, but that will take time.”
DOUBLE WIN
He adds: “In the meantime, many rely on the Bank of Mum and Dad for support. But this leaves behind those who don’t have wealthy parents to help them and fuels inequality within generations.
“We identify around one million ‘priority’ first-time buyers who would enjoy lower housing costs and higher living standards if they were able to get onto the housing ladder.
“For these families a new, targeted ‘Starter Deposit’ equity loan scheme would deliver this double win by providing the 5% deposit they need.”
