So, a bigger deposit is needed to buy a house, how can you save? ‘Property reporter’ has reported that new research shows the amount needed for a deposit will greatly increase by 2045. Barrett and Forrester predict that house prices may rise by 51% with deposits also rising at this same rate.
If this is the case, then the average house deposit would be paying a huge £36,235 for a 10% deposit. That is £12,315 more than today. We need to look at ways in which we can save for a deposit this big.
How do I save for a bigger deposit for a house?
- Set up a standing order – You can set this up from your main bank account to your savings account so that you can save automatically monthly.
- Create a budget. – Create a spreadsheet of all of your outgoings and then allow some money for luxuries. This can include going out, clothes, presents etc. That way you can keep track of roughly how much you should have left over. Money.co.uk have a great article on how you can write a budget
- Use savings apps.- There are apps such as Plum which can create automatic roundups of your spending so you do not notice the money coming out as much. Plum then saves the money into a savings pot which then you can withdraw into your bank or savings account. You can create different pots so that your money stays separate, these could include house deposits, Christmas pot, birthday etc.
- Skip your weekly takeaway – By skipping your weekly takeaway, you could save £80 a month (based on £20 per week). You could put the money you would have used into your savings and will have saved £960 for the year!
These factors are just some of the smaller changes that you can make to help save money where you can. So, what bigger changes can you make?
Making choices to get the bigger deposit needed to buy a house
We need to look at some of the bigger changes we could make to save more for a deposit.
Paying less rent – Paying a small amount of rent is something that would greatly help us all, however it is not easy to come by. If you moved from living in a private rental to one offered by a housing association or council, you could be paying less rent . Generally, housing association properties are either social rent or affordable / intermediate rent (these properties are 80% of market rent in the private rental sector) so you would be saving around 20%. Start your search for affordable rental properties.
Take advantage of the Help to Buy ISA or the Lifetime ISA – You can use either of this government initiatives to boost your savings. If you want to get the 20% bonus on anything up to £12,000, you need to have already opened your Help to Buy ISA as the scheme has ended for new applicants. The LISA is a government bonus where they give you 25% of whatever you put in each year (up to £4000). These are great ways to gain extra money for your deposit without you saving it.
Consider Shared Ownership – You could consider using the Shared Ownership scheme to buy your first home. You can read our blog about what shared ownership is and how it works. In short, shared ownership means that the home you own is part owned by a housing association. Shared ownership is usually where you own between 25% and 75% of your home. This means you may only need to pay a 10% deposit on a 25% share.
You can search for Shared Ownership properties on our site.
We hope this has helped you to understand changes that you can make to help you save for your deposit.
Of course, no one knows what house prices will be by 2045 or the average deposit cost, this is just the prediction. You can give yourself a head start in saving for a deposit by using these handy tips and tricks.