Tips for saving a house deposit
The monthly forecast of falling house prices has done little to endear brick and mortar investment to those that bought their house before the market started to plummet. If you’ve read reports such as the research from property website Zoopla in March of this year that claimed a massive £45,000 has been wiped off the average house price since the credit crisis began and thought that meant you’d have an easier time as a first time buyer putting a deposit together, you’d be very much mistaken.
While existing householders are left to gnash their teeth month after month as the value of their property nosedives, those saving for a deposit are sailing even stormier seas – new research published today by first direct shows that the average house deposit is now £66,000. This is an increase of £60,000 since 1990. The bank stated in its report that a typical UK home costs around 6 times more than an average household income and the deposit, 1.7 times the average income.
With relatively few 95% mortgage products to be found on the British high street and unemployment figures once again creeping up, what can those saving for a deposit do?
1. Reduce unnecessary spending
Although it’s boring, the best way to save money is to cut back on non-essentials and luxuries. Buying lunch at work each day or enjoying a morning latte may only amount to £4 or £5 a day but over the course of a year, those morning coffees and café sandwiches could all add up to hundreds if not thousands of pounds wasted. Buying a thermos and taking a coffee from home to drink on the commute or preparing a salad or sandwich for lunch before leaving the house may not seem overly glamorous but is a small sacrifice to make in the long term and could land you your dream house much sooner.
2. Switch to cheaper brands
Many of us will do the weakly supermarket shop on auto-pilot, throwing in the same items week after week. Sometimes this can mean buying more expensive products when cheaper versions are available – switching to supermarket own brand cleaning products for example won’t have any discernable impact on the cleanliness of the house but will reduce the weekly bill if you’re accustomed to buying brand name products. These savings can be put towards the house deposit and will mount up month on month.
3. Shop around for better deals on bigger purchases
Saving for a house deposit doesn’t mean having to forsake holidays and other occasional treats until the target amount is reached but, it does mean that more shopping around is required. If you’re adventurous, leaving booking the holiday till a few days before can cut hundreds of pounds of the cost of the break as last minute getaways are significantly discounted. Booking a week or so before can see savings of as much as £400 or £500 per person – and if two of you are going that means an extra £1000 towards the house deposit. Similarly, getting into the habit of pre-booking airport parking can save £40 and using an online travel money service rather than exchanging at the airport has been shown to save at least £30 or £40 on larger currency transactions- making another £100 in that month’s deposit savings.
4. Consider how much rent you pay currently
If you’re renting a property while also saving for a deposit, it can seem like the goal post moves further and further away with each rental payment you make. The frustration of knowing your rent could pay a mortgage is also hard to take. If your serious about saving, consider moving to a less expensive area on a temporary basis and put the difference in a savings account or club together with friends and family to form a house share, splitting the rent between two or three to reduce the cost.
5. Find a good savings account
Every high street bank in the UK offers some form of saving account. Many will even set one up when you open a current account. Don’t be afraid to shop around to find an account with a better rate of interest. Set up a standing order to this account to come out on the same day your salary hits and you’ll start to see the house deposit saving’s account as just another bill rather than money you can dip into.
6. Go online
Auction site eBay recently announced that there were more eBay millionaires than ever before. The site has frequent free listing weekends where there’s no charge for adding items so add those things you no longer need or want and make a profit out of things that are just left lying around or stuck in boxes in the attic. For those who are creative, it’s also easy to set up an eBay shop if you have more than a few of one item to sell or are good at making things.