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The savings hacks to help first-time buyers

Ben Osgood, Head of Beehive Money, part of Nottingham Building Society, suggests some ways to help people to save a deposit towards their first home.

Being a budding first-time buyer in the current economic climate, you would be forgiven for feeling a bit down on your luck. From the pandemic, to rising house prices and now a cost of living crisis affecting how much you can save – it’s been a tough time for those trying to take their first steps onto the property ladder.

The saving grace for those trying to accumulate their deposit is that rising interest rates could provide some welcome relief as the change will hopefully mean savers see a better return on their investments. With such a volatile market, how much people need to save and how long it will take them to get there can change in an instant so here’s the two key things hopeful homeowners can do to get themselves ahead.

Love your Lifetime ISA

Most savvy savers have heard of an ISA (Individual Savings Account) but have you heard of a Lifetime ISA (LISA)? Having just celebrated its fifth birthday in 2022, the LISA is supporting savers to build their deposit at a time when they need it most, making home ownership more achievable for GenZ and Millennial first time buyers.

It’s a type of ISA designed for a first home or retirement fund (or both) and since its introduction in 2017 over 118,000* people have used a LISA to successfully fund a house purchase, with thousands more still saving into theirs.  This figure is significant but still means there’s lots of first time buyers missing out on the Government bonus. And when you consider that’s 25% on up to £4,000 a year, that’s a great boost for most savers.  

For every £4 saved in a LISA, the Government will add £1. Each tax year you can deposit £4,000 into a LISA meaning you can benefit from up to £1,000 in bonuses, plus the account interest all of which will help you to save your deposit quicker.

There are things to consider: you must be aged 18 to 39 to open one and you can’t withdraw money from this account unless it’s for the purposes of buying your first home** and the property you buy has to cost less than £450,000.

Get expert help as soon as possible

When enlisting the help of a mortgage broker, the sooner, the better mantra is key. A broker will review your circumstances and ambitions and then help paint a picture of what your affordability looks like and how much you should be aiming to save. Since the pandemic, typical working patterns and income streams have changed significantly, with more of us opting to move away from the standard 9-5 desk job.

A mortgage broker can help you understand what any change in your circumstances, or the external market, means for your borrowing, helping you navigate the application process and cut through the jargon. The economic climate and mortgage market is ever-changing so if you’ve already been saving for your deposit it’s worth a check-in conversation to understand whether you can make any tweaks to your plans to get your closer to your goals of home ownership.

So, although it may feel like an uphill struggle at times, there are things you can do to help yourself along the way.

Whether it’s using a LISA, the bank of mum and dad or just savvy saving, whatever pathway you take to building your deposit, stay positive and informed and soon enough that Pinterest board will become a reality.

*HMRC Annual Savings Statistics 2022

** With a couple of exceptions, including terminal illness, otherwise you’ll be subject to a 25% Government withdrawal charge.