How much do I really need to save for my first home?

Last updated 26/05/2020 to update Lifetime ISA government withdrawal charge no other figures revised since article published 20 December 2019.

It’s a good question. Research conducted by HM Land Registry in April 2019 found that the average house price in the UK at the time was £228,903, indicating that at the moment depending on where you want to live, what type of home you want and how much you can borrow, you could have to save at least £10,000 for a 5% deposit.

And there are also extra expenses to think about, including stamp duty (although if you're buying in England or Northern Ireland and the house is valued at less than £300,000, you’ll currently be exempt if you’re a first-time buyer – for joint mortgages both applicants must be first time buyers to qualify. Different thresholds apply in Scotland and Wales). If you use a broker to help find a mortgage you might have to pay up to £500 as a fee for this service. To have a basic survey carried out on your property it could cost up to £250, and your legal costs could amount to between £1,000-£1,500. On top of that, there are also moving costs, etc. to consider.

Be realistic, be optimistic

Let’s face it, it can be hard to save to buy a property, but not impossible. If you’ve just started saving for your first place, you might already have picked the area or even have your eye on a particular property. It’s good to understand what you want from your first home and save for it. It’s also worth considering the things that might affect your savings between now and the time you’ll be buying such as new cars, holidays, or weddings, especially if you have a few years to go.

Top Tip

Try our affordability calculator to see how much you might be able to borrow based on your incomings and outgoings. This could be useful for helping you work out how much deposit you might need.

House prices may change in the long-term

The house you’re saving for in 2020 probably won’t cost the same in 2029. Between August 2009 and August 2019, house prices rose by 43%. So, let’s imagine there’s a similar rise in the next ten years, then you’re looking at an average house price of £334,992. It’s frustrating, but if the price of the place you’ve set heart on goes up, the amount of the deposit required for a mortgage would be likely to go up too.

Save hard

Let’s not get ahead of ourselves though – remember, it may be hard to make that first step, but not impossible. With a bit of careful planning and a proactive approach to saving, you could do it. Get into good savings habits early on. If you get a pay rise, don’t blow it, be sensible, and if you’re aged 18-39 you could even consider putting it away in something like a Lifetime ISA (LISA), which is designed to help first-time buyers save for a deposit or to help save towards your retirement.

The best thing about a LISA is that you get a 25% bonus on every penny you put away, and each year you can save up to your LISA allowance, which is £4,000 for the 2019/20 tax year, up to and including the day before your 50th birthday. It all adds up. Let's just say if you could save £4,000 a year for five years - with the government bonus added you'd have a deposit of £25,000.

However, it’s important to note that any withdrawals from your LISA within 12 months of your first payment in will include a 25% government withdrawal charge (20% for withdrawals between 6 March 2020 to 5 April 2021), which would mean you'd get back less than you'd paid in. After that, you can withdraw money to buy your first home, but for any other withdrawals before the age of 60, the government withdrawal charge will apply.

Find out more about the LISA withdrawal charges.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Our team is available to help you with affordability checks, explain how a Decision in Principle works, or talk you through our mortgages for first-time buyers.