First-time buyers now need to find a deposit of £32,500

First-time buyers are having to put up more of their own money than ever to get on the housing ladder, despite the slide in prices.

The mass withdrawal of 100 per cent and 95 per cent mortgages by banks and building societies means young buyers need to find tens of thousands of pounds up front, latest figures show.

On average, first-time buyers in London have to put up a 13 per cent deposit, according to the Council of Mortgage Lenders.

With a typical entry-level property in London costing around £250,000, this would mean having to find £32,500 - in addition to stamp duty, legal fees and removal costs.

For the average London property - now more than £350,000 - the deposit would be £45,500, plus £10,500 in stamp duty. The total, £56,000, would have bought the average London property outright in 1990.

Although some lenders are still prepared to advance 95 per cent of a property's value, they are charging higher interest rates. Last week, Abbey said it would continue to offer 95 per cent mortgages but borrowers could no longer add arrangement fees to the deal, meaning they must find up to £2,500 on top of their five per cent deposits.

Richard Roberts of financial consultants Route Group warned: "Those who get away with smaller deposits get worse mortgage rates and risk falling into negative equity. I see no improvement in this situation in the short term."

Howard Archer of economic analysts Global Insight added: "This highlights the major affordability crisis facing first-time buyers in London."

The situation means many prospective buyers are unable to benefit from recent price falls.

Ed Stansfield of analysts Capital Economics said: "Aspiring first-time buyers are no better off. As prices remain at record-high levels, more and more lenders demand that borrowers put down larger and larger deposits.

"Activity levels in the capital's housing market are likely to remain very subdued. This will increase the chances that house prices fall considerably further, so first-time buyers may do well to wait."

Nicholas Leeming, head of propertyfinder.com, said:"Something must be done to stimulate the money markets and encourage lenders to offer mortgages at a reasonable rate with slightly looser criteria. Furthermore, the Government should abolish stamp duty for first-time buyers."