Five Questions About: Housing deposits

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The Independent Online

What is a housing deposit?

It is the amount you pay upfront when buying a property.

What size deposit do buyers need?

It all depends on the price that you agree to pay and the terms of your mortgage deal.

Deposit requirements have shot up in recent years, with new research from First Direct showing that the average housing deposit has leapt from £6,793 in 1990 to close to £66,000 today.

Why have deposits increased so much?

Since 1990, house prices have risen by a factor of 4.32. However, that does not in itself explain why today's buyers are having to find close to 10 times the amount needed by buyers in 1990.

Banks and building societies now require larger deposits from borrowers and reserve their best deals for those able to put down a large percentage of a property's value.

First Direct's figures also claim the average deposit paid by today's buyers is 27 per cent, up from 12 per cent in 1990 and 10 per cent in the mid-1990s.

What difference does the size of your deposit make to your mortgage?

The best two-year tracker deal on the market at the moment for remortgage clients, from Santander, has an initial rate of just 1.95 per cent.

However, the mortgage, which has an arrangement fee of £1,995, is only available to borrowers with a deposit of at least 40 per cent.

For remortgage borrowers who can only find 25 per cent of a property's value, meanwhile, the best deal is from Yorkshire Building Society with an initial 2.29 per cent rate and £995 fee.

What are the best deals for buyers with smaller deposits?

There are still some competitive mortgages available for people needing to borrow up to 85 per cent of a property's value.

The best two-year discount deal in this situation is from HSBC at 2.79 per cent with a £1,499 fee.

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