Raising a deposit is still proving a huge barrier to aspiring homeowners, said Nationwide.

It found that high house prices relative to average earnings mean first-time buyers struggle to raise a decent-sized deposit for a home.

In the third quarter of this year, the UK First Time Buyer (FTB) house price to earnings ratio stood at 5.5, above the previous high of 5.4 in 2007, and well above the long run average of 3.8.

London continues to have the highest house price to earnings ratio at 9.0, although this is still below its record high of 10.2 in 2016.

Scotland continues to have the lowest house price to earnings ratio in the country at 3.4, closely followed by the North at 3.5.

Deposit challenge

The rise in house prices compared to wages means that a 20% deposit on a home is now equivalent to 110% of average income, said the building society, a record high and up from 102% one year ago.

Nationwide found that a significant proportion of first-time buyers now draw on help from friends and family or an inheritance to help raise a deposit.

Andrew Harvey, senior economist at the building society, said: “In 2019/20, around a third of first time buyers had some help raising a deposit, either in the form of a gift or loan from family or a friend or through inheritance – up from 27% 25 years ago.”

Affordability stretched

Affordability is now becoming more stretched across all regions despite low mortgage rates, according to the lender. However low interest rates are keeping the cost of servicing a mortgage low, but it is becoming more challenging.

Harvey said: “First time buyer mortgage payments (based on an 80% loan-to-value mortgage, at prevailing mortgage rates) are currently slightly above the long run average, at 31% of take-home pay.

“The cost of servicing a typical mortgage as a share of take-home pay is now above its long-run average in the majority of UK regions. By contrast, pre-pandemic, this was only the case in one region (London).”