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Deposit requirements prove to be a hurdle for many

A number of recent pieces of research have highlighted the difficulties faced by first and second-time buyers in getting on or moving up the property ladder because of the large deposits required by most mortgage lenders.

Second steppers are finding it hard

The Bank of Scotland has recently published the results of a study that found that around 61% of second steppers have reported being unable to take the next step up the property ladder. Around 56% of them put this down to being unable to save enough to fund the necessary deposit. A further 34% said that they hadn’t found a suitable property, and a similar number were apparently unable to find an affordable property.

The study also found that as many as 16% are giving serious consideration to the prospect of returning to the ‘bank of mum and dad’ or other relatives for a loan to help them obtain the necessary funds.

First-time buyers are also struggling

The Halifax has also conducted some research into house buying trends, and has found that first-time buyers now have to find an average deposit of £26,956 before they are able to buy their first home.

As a result, many are giving up the dream of becoming a homeowner and only a third of respondents are prepared to save for more than three years to build up a deposit. Over half (52%) of young people surveyed are apparently now predicting that Britain will become a nation of renters within the next generation.

Rise in actual mortgage lending

However, the news isn’t all doom and gloom. The latest figures from the Council of Mortgage Lenders (CML) show that mortgage lending is actually going up, with total gross mortgage lending in May reaching £14.7 billion.

This is a rise of 21% from £12.2 billion in April and is 17% higher than the total of £12.6 billion in May 2012. According to the CML, this is the highest monthly estimate for gross mortgage lending since October 2008.

There is help available in Scotland

First and second-time buyers may be finding it difficult to raise the necessary funds for a deposit, but there is help available.

Philip Hogg, Chief Executive of home building industry body Homes for Scotland, explained that they may be eligible to benefit from the MI New Home mortgage indemnity scheme, which enables them to purchase a new-build home up to £250,000 with only a 5% deposit. The scheme also offers the option for home builders to offer part exchange to customers struggling to sell their existing homes, which could be of particular interest to second steppers.

He went on to acknowledge, however, that to get the housing market moving properly again at all levels, there is a need for a range of solutions to meet the requirements of those who can afford sustainable monthly mortgage payments but find it difficult to get large deposits.

Scottish Government provides funding boost

Further help has come from the Scottish Government, which recently announced a £120 million funding boost to help people across Scotland on to the housing ladder over the next two years.

Both first-time buyers and existing homeowners will be able to take advantage of the funding if they choose to buy a new-build home.

The scheme operates on the principle of shared equity, where buyers who have successfully applied to the scheme will be able to purchase a home by paying a majority share in it, while the Scottish Government pays the remaining amount under an agreement with the buyer.

The Scottish Government claims that in addition to helping house buyers, the scheme will also stimulate the construction industry, creating growth within the house building sector at a time when it is badly needed.

Contact our Lawyers

If you are looking for advice on buying or selling your home in Scotland, our Glasgow based solicitors are waiting to help you. Complete our online enquiry form here or come in to see us at one of our offices.