We asked this week’s Marketwatch panel if aspiring homeowners could get on the property ladder faster if they stopped buying lattes and cut out ‘luxuries’ such as Netflix subscriptions.
Martin Stewart, director at London Money believes many people could pull together a deposit faster, as he regularly sees homebuyers who spend £100 a month on coffee.
Dan White, managing director at White Financial Services argues that dropping the coffee habit will make little difference to saving amid the high sums required.
Tracy Simpson, head of lending, Cambridge Building Society says saving for a home is difficult but not impossible and society must encourage young people to be optimistic.
We would all be better off if we stopped sponsoring the biggest Ponzi scheme currently at large – that of consumer-driven economics.
I don’t mean to patronise people when I say they can easily drop some discretionary spend from the monthly budget.
But we regularly see people spend £100 a month on coffees.
Put the kettle on instead. Treat yourself to a mug with your own name on it, and you can pretend someone wrote it on there, if it makes you feel better.
It is also very common to see £200-300 spent on various lunches and takeaways.
Throw in a myriad of TV subscriptions, a million purchases from Amazon that will never see the light of day and a trainer fetish that makes me sometimes feel I am advising a centipede on a house purchase, and it’s easy to see how all this can build-up.
Some people say it’s a different property market today than 20 years ago; they are right it is.
For a start I didn’t earn more than £20,000 per annum until I was 28, interest rates were above 6% (and rising) and no one had even heard of the Bank of Mum and Dad.
I saved hard, drove a car worth £500 and went years before I saw a European city.
I am not saying don’t have fun but if you don’t control your lifestyle then expect your lifestyle to control you.
Either way you pick up the bill, but at least you can decide how big it will be.
The average deposit for a first-time buyer currently stands at £51,821, according to research by London & Country.
That works out to be £4,818.40 per month for a 12-month period, £2,159.20 a month for a two-year period and £1,439.47 a month over a three-year period.
Forgetting about those very kind-hearted family members – how can first-time buyers really try to budget for this kind of saving?
Sorry, but I don’t buy that cutting out your Starbucks addiction and Netflix entertainment greatly helps your overall deposit situation.
In my opinion, it only makes the budgeting a lot more difficult.
Like any attainable goal set in life, discipline plays a huge part, but so does being realistic with that goal.
If you set a target that seems too hard to achieve, through too many sacrifices, then human nature will take over and, before you know it, the goal loses its appeal.
By all means, encourage first-time buyers to pay off all commitments, sacrifice holidays, stay in at the weekends and cut back on the shopping.
But discouraging the idea of buying coffee and watching a film in the comfort of your own home will only feel like an intrusion of enjoying the basics in a modern world, creating a resentment of achieving what seems an unattainable target.
Budgeting needs to be realistic but so does the objective.
The solution for anyone trying to raise a deposit is more complex than to stop buying takeaway coffees.
A healthy approach to saving forms from an early age and, as with most disciplines, some people find it easier to do than others.
Starting to save regularly, even by a small amount, puts potential homeowners in a good position to plan for the costs of running a home as well as buying it.
We all know that there are many demands on income and a positive first step is to visualise owning a home and the budget management needed.
Demonstrating you can manage a budget and any credit commitments is very important.
Almost on a daily basis I read about how virtually impossible it is for people to get onto the housing ladder. While I agree it is difficult, it’s not impossible.
However, if young people believe what they’re reading why would they even start trying to save?
Saving money can be off putting at the best of times but if you’re being told you’ve got no hope then why start?
We’ve seen more competition in the 90-95% loan to value market and government-backed schemes have gone some way to assist, but a discussion with an adviser may also uncover other options, such as sharing with friends or shared ownership.
Saving for a deposit remains a challenge but I genuinely believe if we painted a more optimistic vision our young would do what they had to do in order to achieve their dreams.