Loan often means of funding deposit

Taking out a loan is a popular method of helping to fund a mortgage deposit, new research has found.

A study by Santander has revealed the cost of a deposit is so high that the average first-time buyer takes 3.3 years to save up for it, with 23 per cent taking five years.

For those keen to find extra sources of cash, the solutions may include getting a second job – an option 28 per cent plan to do – while another 27 per cent intend to take out a loan.

Commenting on the difficulty of getting a deposit together, Santander’s director of mortgages Phil Cliff said: “Saving for a deposit is no easy task, especially in today’s financial climate, with many customers, especially in recent years, having to put down larger deposits to secure their mortgage.”

For those who are taking out a loan to help get a deposit together, this could lead to significant debt problems down the line, as they will have that to pay as well as their regular mortgage payments.

Such a situation may intensify if mortgages become more expensive in the next few years as a result of higher interest rates in the future.

One brighter note is that the actual cost of buying a home appears to have fallen, according to research from Nationwide.

This showed the price of the typical UK residence dipped 0.2 per cent in April from £165,609 to £164,751, with this cost also being 1.3 per cent less than the same month in 2010.

By James Francis