Despite Help to Buy allowing buyers to put down a 5% deposit on a home, many are still struggling to save the average down payment of £8,900, particularly when renting. Furthermore, many keen potential buyers are wanting to offer large deposits, so they are not hit with unmanageable monthly mortgage repayments.
Those eligible for a 95% mortgage need to find an average of £18,000 in London, £11,000 in the South East, £6,000 in the North and £7,000 in Wales and Scotland. However, those who do not meet Help to Buy criteria (or do not wish to be part of this type of scheme) often need to look at securing savings of double or triple these figures.
With these deposit amounts being half of some people’s annual salaries in the corresponding areas it is not surprising that many people are struggling to put enough cash away every month. If you want to get out of a savings slump and get your foot on the property ladder, why not put some of the following tips to the test?
Set up a standing order
Do not solely rely on your good intent to squirrel money away every month. Chances are, it won’t happen. Set up a standing order for a couple of days after your payday to ensure that money is being siphoned off into a savings account or ISA every month, without you even having to think about it.
Curb frivolous spending
How often do you eat out per month? Do you really need Amazon Prime? How much do eBay ‘bargains’ add up to? Get to grips with your finances and curb your spending by sitting down with your bank statements and analysing where your pay goes each month. Be money smart and question every purchase and direct debit.
New savings account
Shop around for a new ISA or savings account that offers better rates of interest or perks compared to your current savings account. Whilst many assume transferring money between providers can be a lengthy process, it can actually be accomplished in just a few clicks.
Put goals in your diary
If your ultimate goal is to have £5,000 saved by Christmas, make sure to break this target up into manageable chunks. We are much more likely to stick to something if we can see tangible progress and chipping away at a grand total can seem exhausting, especially if you feel as though you aren’t getting anywhere. Aim for the first £500 and you will soon find the challenge of putting money aside addictive, as you try to beat your time stipulations.
Declutter and sell
Start by picking a room from which to get rid of all your clutter. You’ll be moving once you have saved your deposit, and so now is a great time to streamline your belongings. Not only this, but your ‘tat’ is another person’s treasure. If they’re in good condition, you can sell off your unwanted belongings. Target a different room of your current home every month, and put any cash made straight into savings.
Utilise discounts and bulk buy
Don’t turn your nose up at gems such as Costco, Aldi, Poundland, and Savers. Discount stores can drastically change your monthly spend on groceries and hygiene products, particularly when available in bulk. Don’t be afraid to buy ‘own brand’ products; more often than not it’s exactly the same as a premium brand in less attractive packaging.
Moving into a cheaper property
If you’re currently renting and finding that saving is near impossible, consider moving into a cheaper rental property. Agents don’t often charge fees if you are moving into another property they manage and you could, in turn, save on council tax and bills too.
Consider a low entry point
Whilst many first-time buyers dream of a three-bedroom detached family home with off-street parking and a landscaped garden, this isn’t a realistic first home for many. Scaling down your expectations on your first home and opting for a lower entry point into the market is a wise option for most.
Stick to a budget
Although it can feel restrictive, planning what you want to do with your finances every month can help you save money monthly. Whilst budgeting to the nth degree isn’t needed, setting out a rough figure for necessities as well as ‘free spend’ money will help you see how much you could potentially save every month.
Get a lodger
If you live in a rental property that has a spare bedroom, ask your landlord whether you can fill the room with a new tenant. This is a great way to subsidise the cost of renting and allow you to put a portion of what would usually be your rent into savings.
The bank of mum and dad
In 1990, 40% of 20 to 24-year olds managed to purchase a property with their own savings, with this figure dropping to just 13% in just 10 years.
Eight years on, this pattern has continued and means that just 7% of 20 to 24-year olds are buying a home with their own savings. Today, many people around the UK are having to rely on substantial cash loans from their parents to scrape a deposit together.
Whatever path you choose to home ownership, always make sure that your pot of savings is going towards the best mortgage possible by seeking out the best deals and rates.