Matthew Addison, CEO of StepLadder- the UK’s first collaborative deposit raising service. Saving up for your first home can be feel like an overwhelming experience and with the latest research showing that it could take a typical first time buyer 10 years to save a 15% deposit without family support, it often feels like the goal post is constantly moving.
You will often be reading about the uncertainty in the property market as a result of Brexit, with house prices falling, yet this news is actually a good thing for first time buyers. Over the last 30 years, we have seen the costs associated with climbing on the property ladder balloon out of control and up until this point, the cards have been stacked unfairly against first time buyers. This fall in house prices helps make things fair again.
So how could you take advantage of this and maximise your savings to beat the trend and get your deposit together?
Set a goal and start saving up early
Getting into the habit of regularly putting money away is the first step in mastering personal finance. Even if it is only a small amount at first. Saving for a £15,000 deposit is an overwhelming thought, while saving in £1000 or even £150 increments is far less daunting. We set up our First-Steps Circles to help people learn how to save through a peer to peer lending solution with achievable goals and get into the habit of putting money aside each month. Set up monthly or weekly saving goals and start early – ten years from 22 is very different to ten years of saving ahead when you are 32. When your setting your goals, don’t forget to factor in additional fees, like surveys and lawyers’ fees.
Learn how your income effects your borrowing budget
The amount you earn will impact the amount you can borrow and subsequently the value of the house you can buy. To apply for a mortgage, you will need to provide three months back dated payments and show regular income, which can prove difficult for those who are self-employed or contractor workers, so make sure to look into the best option for your current career.
Separating your savings
Along the way, we might be tempted to dip in a little. Having the discipline to not touch the money you’re putting aside can be tricky, so remove that temptation altogether by putting it somewhere you won’t be able to. This doesn’t necessarily mean putting it into an account where you’ll be charged for taking some out, especially for shorter term savings, but moving the money into a separate savings account can stop you dipping in unless you really need to. If the account comes with a card, hide it!
Make the most of the government schemes
There are a lot of government schemes in place to help you kickstart your savings, and one of the best is the Lifetime ISA (LISA). Designed for UK residents aged 18-39, a LISA allows you to contribute up to £4,000 a year up to your savings until you reach the age of 50, and the government will give a 25% bonus on contributions. Just be aware that you can only access your savings to buy your first home (up to a value of £450,00) or for anything you’d like once you’re 60. Anything else will incur a hefty fee.
Remember you are not alone
Finally, don’t forget you are not the only one on this journey- it is a generational challenge. Talk to your friends and share saving tips. Saving with friends is a great way to motivate yourself and others around you. There are topping up and rounding up on apps, like Squad, as well as systems called ROSCAs which mean you can save faster together.