October 25, 2022
Saving a deposit to buy a house in Britain isn’t easy, but it can be done through dedication, hard work and a little help from the Government and your parents. In this article, we explain what a house deposit is, how to calculate the deposit you’ll need and some ideas on how to save it.
Getting on the property ladder is difficult, but it’s not impossible – here’s how to save for a house deposit in the UK in 2022.
Property price
Let’s start with some home-buying basics. To secure a mortgage, you’ll need a deposit. You can secure a mortgage with a deposit of 5%, but to get the best mortgage deal (and the lowest interest rates), you’ll need more. Experts suggest first-time buyers should aim to save up to 15%.
To work out your mortgage deposit, multiply the advertised price by the percentage. For 5%, multiply the total by 0.05; for 10%, multiply the figure by 0.1; for 15%, it’s 0.15.
The average first-time buyer paid £281,900 in 2021 for their property, says Barclays. Some simple maths shows that the average deposit (at 10%) is £28,100. But that doesn’t tell the whole story. As stats show, property values are different up and down the UK, with expensive properties in the South East and London.
Even some of the best-paid people might struggle to save the £45,000 needed to secure a £300,000 property, but at Simon Blyth, we have properties for sale starting at £50,000. The deposit for that is a much more achievable £7,500.
Saving up a sizable deposit is a big step, but there are other costs you’ll need to cover as part of the house purchase process. You’ll need to set aside cash for legal fees, surveyor’s costs, moving expenses and more.
You’ll also need to ensure you have a squeaky-clean credit record and credit score.
Budget plan
So, you’ll have a savings target in mind – now it’s time to create a plan to get there. Here are 5 tips to help you:
1. Create a dedicated savings account – You’ll want to create a savings account for your deposit with a clear savings goal. Sure, you can stick it in a bank, but if you’re a first-time buyer, a lifetime ISA will see the Government boosting every deposit by 25%. That’s right, for every pound you put in, the Government adds 25p. So if you’re saving for a mortgage deposit of £20,000, you’ll only need to find £15,000!
2. Assess your spending – Saving for a deposit means sacrifice. That’s as true today as it has been for every generation. There’s a lot of negativity about spending (avocado toast, anyone?), but we’re not going to judge you. Get copies of your bank and credit card statements, or download them, look at how you spend your money, and identify ways you can make savings on everyday spending. Not taking a holiday could save you hundreds, but cutting out a takeaway coffee daily could save you more. You’ll still need to live and enjoy life while saving, but remember cutting back on spending isn’t forever.
3. Save regularly and intelligently – Firstly, you should set up a direct debit to ensure the cash leaves your account and goes straight to your savings account. This stops you from accidentally spending it on something else. While we know the cost-of-living crisis is hitting us all, if you get a pay rise, bonus or workplace windfall, stick it straight into your savings. (If you can cope with your salary today, adding the extra to a savings plan won’t affect you!)
4. Earn additional income – This may be hard if you’re already struggling with the 9-5, but adding an extra income stream can help you save for a deposit quicker. You could complete some freelance work, work some extra shifts or work weekends. If you can’t work more, you could look at earning some extra cash by selling unwanted or unneeded possessions. Clothes, books, bikes, records and even those 80s roller skates you’ve got hanging around could get you a little closer to your deposit target.
5. Battle bills – Saving money on your bills can help you get closer to your savings target. Firstly, never renew insurance or contract without searching for a better deal. Using a cashback service such as Quidco can help you earn as you earn a commission for many household expenses. Existing agreements, such as phone and TV contracts, can often be renegotiated mid-term. Finally, there are several ways that you can cut bills by making your home more energy-efficient, says the Energy Savings Trust.
Help
It’s possible to save on your own for a house deposit, but evidence shows that 56% of first-time buyers require additional support. The most common source of funds is, of course, family. The “bank of mum and dad” may have a bad name, but for many of us, support from a family member is the only way we’re able to buy a home. Mortgage brokers call this a gifted deposit, which all lenders accept as long as you have evidence of where it has come from.
You may also qualify for some grants depending on what you do and who you work for. The NHS, for example, offers support for first-time buyers. Other key workers may also be able to access schemes, so be sure to do your research.
It’s also worth checking to see if there are any lost savings accounts that you may have owned. Which? has produced a great guide that could help reconnect you with lost savings accounts or forgotten pots. It’s a long shot, but worth a try!
Finally, moving can make saving for a deposit easier. For example, average house prices in Yorkshire are lower than in the UK. So moving here and buying a house with Simon Blyth could help you secure the property of your dreams and save you money.
Summary
We’ve said it repeatedly, but saving for a house deposit is a struggle for everyone – but it is possible. At Simon Blyth, we offer first-time buyers and existing homeowners access to Yorkshire’s largest selection of properties at the best prices. We also offer free independent mortgage advice with access to 1000’s of different mortgage products and lenders. We highly recommend speaking to one of our advisors as different lenders require different levels of deposit so you may be closer than you think! So whatever your budget, contact us today, and we’ll chat you through your options and suitable properties.