House prices are some 30% higher than they were in 2007, according to Zoopla figures, and continue to rise on the back of the demand-ramping Stamp Duty Holiday. This is bad news for first-time buyers, of course, as it is making it much more difficult for them to get together enough money for a deposit.
To help first-time buyers get the money together to put their foot on the first rung of the housing ladder, here are some ways anyone can save.
Help to Buy ISA or Lifetime ISA
The government runs two savings schemes designed for first-time buyers. The Help to Buy ISA is a savings account for anyone from the age of 16. You can save up to £2,400 per year, plus £3,400 in the first year, paying up to £200 into it monthly. Once you have saved £1,600, you can use it to buy your first home (up to a value of £250,000, or £450,000 in London), upon which you receive a bonus from the government worth 25% of the value of the ISA – up to a maximum of £3,000.
If you’re 18 to 39, you could also choose a Lifetime ISA (also known as a LISA). With one of these, you can save up to £4,000 per year, in a lump sum if you wish, earning a maximum 25% bonus up to £32,000 (32 years’ worth of maximum contributions). This money can be used on your first home worth up to £450,000 after you’ve had the LISA open for a year. If you don’t use the money on a home, you can also get the bonus if you use it for retirement.
The choice of which is better depends on your situation. However typically, if you’re under 18, open a Help to Buy ISA, then transfer it into a LISA on your 18th birthday – if you maximise your savings you’ll get both a bigger deposit pot when you buy, and be able to browse a bigger range of homes.
If you’re finding it hard to save money but want to save more, think about the ways you could boost your income. Full-time jobs with above-average salaries are the obvious candidates here, though you could take on a second job, monetise a hobby, or invest your money into stocks or forex trading using the Mt4 online platform to create a secondary source of revenue.
Savings and stocks
Alongside LISAs and Help to Buy ISAs, you could also put additional money in a traditional savings account or Stocks and Shares ISA, where you invest in index funds. The former is a safer haven for your money, but won’t offer a good return. The latter, while potentially more lucrative, is much more risky, with your money subject to the whims of the wider economy and funds you invest in.
Here, it’s generally a good idea to put money required for a house purchase in the near term into savings, and to save into a stocks and shares account for long-term savings goals.
How to save for your first home is a feature post