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First-time buyers told to cut back on socialising

Friday, 21 July 2006 12:00 AM

First-time buyers need to cut back on socialising if they want to save enough money for a deposit on a house, according to a new study.

Aspiring buyers are spending up to £136 a month on non-essentials including eating out, music and leisure activities.

And they are falling a long way short of saving enough for a deposit on their first home.

Research by Alliance & Leicester Mortgages shows that first-time buyers want to save, on average, a deposit of £11,710 - roughly eight per cent of the average first-time buyer house price.

However, when it comes to saving they are looking to put away £270 a month for two years, which with interest will only give them £6,570 - a shortfall of £5,140.

This means that aspiring buyers will actually have to save almost double - £500 a month - or save for longer, over a period of three and a half years, to reach their target amount.

Alliance & Leicester's Richard Taylor warned: "If house prices continue to increase, it is in the interest of hopeful first-time buyers to make saving for their deposit a priority.

"Any delay could mean they see further increases in house prices, and need to keep on saving longer in order to reach their target deposit."

Cutting back on socialising can quickly help first-time buyers to realise this, as they currently spend an average of £1,639 a year on leisure, rising to £2,204 in London.

Halving their leisure spending - to £68 a month - would mean them saving a sufficient deposit eight months sooner.

Mr Taylor added: "To turn dreams into reality it's a good idea to plan and budget carefully - trying to cut back on luxury expenditure, like takeaways and expensive nights out, will all help to achieve their dream more quickly."

However, there is an alternative that does not involve cutting back on socialising. Alliance & Leicester points out that first-time buyers only need to save a five per cent deposit to get a competitive mortgage rate while avoiding the penalties that apply to people buying with no deposit at all.

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