You may be thinking 2020 is the year you buy your first home.
If so you’re likely to be asking yourself questions such as how much can I afford to save and how long will it take to build enough for a deposit?
A house deposit typically requires 5%-10% of the value of a property. The more money you put towards your deposit means the less you need to borrow from a mortgage provider and, as a result, will reduce the amount of interest you will need to pay back to the lender.
The amount you need to save for a deposit will also be largely dependent on factors, such as:
- House prices, which vary greatly depending on where you’re looking to buy
- How much you can afford to borrow
- How willing lenders are prepared to loan your mortgage to you
- How much of a deposit you can build
According to the Office for National Statistics (ONS) the average deposit saved for first homes across the UK is £43,585. However, the location of where you are purchasing a home significantly influences prices, and therefore the deposit required. For example, the average deposit saved in many parts of the UK is approximately £21,000 while it’s £170,000 for those buying in London.
The average value of UK house prices is currently at £235,000, according to the latest information from the ONS.
Average UK house prices peaked at £235,000 in August 2019
Average UK house price, January 2005 to September 2019
Source: HM Land Registry, Registers of Scotland, Land and Property Services Northern Ireland, Office for National Statistics – UK House Price Index1
Further figures suggest the average saving for those wishing to buy their first home is £843 per month.1 Saving at that rate towards the average deposit of £43,585 means it would take over four years to save for a house deposit.
In reality it is much more down to personal circumstances; some people may take much longer or shorter to save for their home deposit. There are additional elements to consider too, including the increasing number of first-time buyers relying on the ‘Bank of Mum and Dad’ to help them get on to the property ladder. Legal & General reported that the average contribution from parents in 2019 is £24,100.2 This is very circumstantial and certainly not an option for most people looking to get on to the property ladder.
To help you get a fuller understanding of your finances, and how much you can afford to save when working towards a home deposit we have a Budget Planner calculator. Click here to use this free tool to get a grasp on your income and outgoings.
