The Money Charity has released statistics which show that it would now take 30 years to save for a deposit for a home. Releasing their latest Money Statistics the report finds that historically low saving rates and negligible returns on deposits make home ownership an ever more distant dream for many. If someone on the average salary saved an average chunk of their income in the average-interest instant access savings account, it would take 33 years to save the £28,552 deposit a first-time buyer typically puts down on a house.
This is the highest figure since The Money Charity began calculating the statistic, and up 13 years from April 2015. The big driver is not increasing mortgage deposits. These have remained fairly steady over the last couple of years. The ever harder task of getting on the housing ladder has been driven by record low savings rates and returns on saving pots. In the last three months of 2016, the average adult was saving just 3.3% of their income. This is the lowest rate of saving since the early 1960s, and less than half the long term average of 8%.
Making the situation tougher still for savers is the very low rates of return you get from instant access savings accounts – 0.1% in February. For a cash ISA, this was 0.41%.
This means that if someone on the average salary saved 3.3% of their income in an average instant access savings account for a year, they would receive 70p in interest after tax. If they saved it in an average cash ISA, they would receive £3.58. Once you consider the inflation rate of 2.3%, these returns actually represent saving pots getting smaller.
Michelle Highman, Chief Executive of The Money Charity says “A house is the largest asset that most people have. The rates of saving and interest rates that have been so low in the last few years are making home ownership an ever more distant dream for those who don’t get financial help. But this should not put you off saving today. Just because one big goal might seem a long way off for a lot of people, it does not mean that saving is not a worthwhile thing to do. If you can put anything side it will immediately make you more secure and put you in a better position in the longer term to achieve your life goals.”
Other key points from the March Money Statistics include:
- The Pensions Regulator estimates that at least 7,507 million employees had joined a pension scheme under auto-enrolment by the end of February 2017.
- Outstanding consumer credit lending was £196 billion at the end of February 2017.
- Total credit card debt in February 2017 was £67.3bn. Per household this is £2,493 – for a credit card bearing the average interest, it would take 25 years and 11 months to repay if you made only the minimum repayment each month.