First-time buyers in England are reportedly facing a deposit requirement of approximately £16,850 for a 5% deposit on the current average UK house price of £272,000, according to financial information service Moneyfacts. This figure also includes moving costs and legal fees.
A new initiative, the "Your First Home" scheme, was announced on Saturday with the aim of assisting first-time buyers in England to get onto the housing ladder with a smaller deposit.
Experts suggest several strategies for saving. Anna Bowes, a savings expert at The Private Office, recommends treating saving like a regular bill by depositing an affordable amount into an account the day after being paid. The type of account suitable depends on individual circumstances, with some high-interest options requiring a current account with the provider.
Another option is the Lifetime Individual Savings Account (LISA), which offers a 25% government bonus on savings up to £4,000 annually, potentially adding £1,000 a year. However, funds can only be used for a first home up to £450,000, a threshold unchanged since 2017, or after age 60, or in cases of terminal illness. Withdrawals for other reasons incur a penalty. Ministers are planning to replace the LISA with a new First Time Buyer ISA, but details are currently unclear.
Starting to save early can leverage compound interest, allowing a smaller monthly contribution to build a significant sum over time. Additionally, some lenders are offering mortgage deals with minimal or no deposit required, with options starting from £5,000 and allowing borrowing up to 98% or 99% of the property price. These options may not be suitable or available to everyone.