Homebuyers 'need £40,000 deposit'

Homebuyers need an average deposit of nearly £40,000 in order to qualify for a best buy mortgage deal, research has shown.

People buying an average priced house in England and Wales of £180,781 would need a deposit of around £37,119 to secure a competitive mortgage rate, according to mortgage company mform.co.uk.

The figure is 43% more than the £20,980 they would have needed to secure a leading rate last year.

The group said that despite house prices falling, the amount of money people needed as a deposit was rising as lenders became increasingly risk averse and scaled back the loan-to-value ratios they were prepared to advance.

It said people now needed an average deposit of 20.75% of their home's value to secure a best buy mortgage rate, nearly double the 11.75% they would have needed a year ago.

Popular two-year fixed rate mortgages have seen the biggest increase, with average deposits on these deals soaring from 10% in August last year to 23% now for leading rates.

But people also need an average deposit of 22% of their home's value to get a leading three-year fix and 20% to get a top five-year one.

Unsurprisingly, there is huge regional variation in the level of deposit that people need to get a best buy mortgage deal.

Homeowners in London need to amass the biggest deposit of £71,616 to buy an averaged priced home of £345,000, followed by those in the South East at £46,843.

Even in the North East and North West, where property is cheapest, people would still need to save nearly £28,000 to qualify for a leading mortgage rate.

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