Falling Deposits Offer Encouragement for Home Movers

There has been some welcome news for buyers hoping to take their next step on the property ladder, with new Barclays research showing that the average deposit being provided by existing homeowners has fallen considerably.

According to Barclays’ mortgage data, the average deposit used by home movers was 24.8% lower in June than it had been a year earlier. This came despite the average purchase price paid by home movers increasing by approximately 1% over the same period.

Although this does not necessarily mean that moving home has suddenly become inexpensive, it suggests that more buyers are using higher loan-to-value mortgages rather than waiting until they have accumulated a much larger deposit.

Could this help unlock the property market?

The amount of money needed upfront has become a significant obstacle for many people looking to move.

Existing homeowners may have built up some equity in their current property, but that does not always provide enough to fund the deposit, legal costs, Stamp Duty and other expenses associated with purchasing their next home.

Barclays found that 34% of prospective second-steppers feel stuck in their first property because moving has become too expensive.

This can have a knock-on effect throughout the property market. When first-time owners cannot move into a larger property, fewer starter homes become available for first-time buyers. When fewer transactions are taking place at the lower end of the market, chains further up the ladder can also become harder to form.

Greater access to mortgages requiring smaller deposits could therefore help more homeowners move, releasing additional properties onto the market and creating opportunities for buyers at several different stages of the property ladder.

What does this mean for buyers in Keighley and the surrounding area?

For buyers across Keighley, Haworth, Oakworth, Silsden, Bingley and the wider Aire and Worth Valleys, the figures provide some grounds for cautious optimism.

Our local market offers a broad selection of properties, from affordable terraced homes and first-time buyer opportunities to larger family houses and rural homes. Because prices vary considerably between locations and property types, buyers may have more options than they initially realise.

A homeowner who previously believed they needed to save tens of thousands of pounds more before moving may find that a suitable mortgage is available at a higher loan-to-value ratio. This could allow them to place their current property on the market sooner and begin looking seriously for their next home.

However, buyers should not focus solely on the size of the deposit. A smaller deposit normally means borrowing a greater proportion of the property’s value, which can affect the interest rate and monthly repayments. Barclays advises that buyers will typically need at least a 5% deposit, while providing 10% or more may give access to a wider choice of mortgage rates.

Obtaining professional mortgage advice at an early stage is therefore essential.

Sellers could also benefit

Improved deposit affordability is not only positive news for people hoping to buy. It could also benefit homeowners considering selling.

More accessible mortgage options may encourage buyers who have been sitting on the sidelines to begin viewing properties and making offers. This is particularly relevant to sellers of traditional starter homes, two and three-bedroom houses, and properties suited to growing families.

The Barclays research also found that the average property purchased by a home mover was 59.5% more expensive than the average first-time buyer purchase, illustrating the significant financial jump that many homeowners face when climbing the ladder.

Realistic pricing remains crucial. Buyers may be able to borrow at a higher loan-to-value, but they will still be working within carefully assessed affordability limits. Properties that enter the market at an accurate and competitive asking price are consequently much better placed to generate early interest.

A positive sign rather than a complete solution

The latest figures should be viewed as an encouraging step rather than evidence that all affordability problems have disappeared.

Mortgage repayments, moving costs and general household expenses will continue to influence buyers’ decisions. Nevertheless, falling deposit requirements could remove one of the largest initial barriers faced by people who are ready to move but do not have a substantial amount of cash available.

Barclays’ assessment is that affordability has been gradually improving as earnings have outpaced house-price growth and borrowing rates have come down from their previous peak, although the wider economic outlook remains uncertain.

For the local property market, anything that enables more first-time buyers and existing homeowners to proceed with confidence is welcome news.

Thinking of moving?

The first step is to establish what your existing property is worth and obtain a clear understanding of your likely purchasing budget.

As an independent, family-run estate agency, Davies Properties provides honest and realistic valuation advice based on local market evidence. We can help you assess the likely value of your home, explain current buyer demand and discuss the most effective way to bring your property to the market.

To arrange a free, no-obligation valuation, contact Davies Properties on 01535 872 018.