A new Government-backed deposit scheme, proposed by the Resolution Foundation, could help up to one million first-time buyers in the UK. Under the 'Starter Deposit' plan, the state would provide equity loans covering a 5% deposit, potentially requiring as little as £3,000 from buyers' own savings, with loans limited to lower-priced properties.
The foundation describes this as a 'double win', estimating that typical buyers could save £2,600 annually on mortgage repayments compared to rent, while also accumulating average property wealth of £1,700 in the first year due to rising house values. The initiative aims to reverse a sharp decline in home ownership among low- and middle-income households, which has fallen by 17.4% since 2008, compared to a 4% drop for wealthier families.
Research examining 8 million potential first-time buyers aged 21 to 55 found that while half could meet income requirements for a mortgage, only 15% can afford a deposit. This has led to roughly one in three buyers relying on the 'Bank of Mum and Dad', exacerbating inequality between those with family wealth and those without.
Simon Pittaway, senior economist at the Resolution Foundation, said: '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.' He warned against simply relaxing mortgage regulations, as repayment pressures for first-time buyers are already at levels seen in the early 1990s and mid-2000s.
The foundation stressed that while building more homes is crucial, it will take time, meaning deposit support schemes are needed now to help those locked out of the market.
