Renters in London face a five year delay in buying a home of their own if they leave savings in cash, due to record-low interest rates, fresh research shows.
The surge in residential property prices over the past 20 years means that the amount required for a deposit to buy property has increased sharply.
With rent and other costs of living on the rise, many struggle to put money aside to save for a deposit, and 41% do not expect to get onto the property ladder at all, according to the study, undertaken by Bricklane.com.
The research showed that a couple with £20,000 in savings, putting aside a total of £600 each month, would have to save for 14 years in order to afford either of these properties using a Cash ISA. However, the same couple could afford a £410,000 home almost six years sooner by saving with a Property ISA – where their money is invested into a set of funds used to buy properties and returns are based on changes in the properties’ values plus their rental income.
Similarly, if an individual with £15,000 putting aside £350 each month wanted to save for a property costing £250,000, then they could reduce the time taken to reach their deposit by just under five years. Even if house prices were to grow by only 2% per year over the period, they could still save just over two years.
Simon Heawood, Founder of Bricklane.com, said: “Generation Rent is being doubly hit by rising house prices and low interest rates, meaning cash savings are not getting them any closer to the property ladder. With a big drop in home ownership among millennials and almost five million households in the UK calling their rented property home, now is the time for action.
“Young people work hard to put money aside for a deposit, but by saving into Cash ISAs they’re putting their chance of owning a home in even greater jeopardy. We need to get people participating in and benefitting from the residential property market so that everyone can make their savings work harder and get closer to owning a home.”