How to save for a house deposit: 12 money-saving hacks for first-time buyers
Dreaming of homeownership but feeling overwhelmed by sky-high property prices? You’re not alone.
With the average UK house price at £264,900*, even saving a 10% deposit seems like a big mountain to climb.
But don’t hang up your homeownership dreams just yet! This is where a bit of financial ‘mojo’ comes into play. We’ve shared 12 money-saving hacks that go beyond the obvious, each designed to help boost your deposit fund and fast-track your journey to becoming a first-time buyer.
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How to save for a house deposit: 12 strategies that can help you save £7,130
We’ve shared 12 unique strategies that could save you an additional £7,130 per year on top of any direct savings that you set aside.
Please note: The savings mentioned are potential estimates and may vary on individual circumstances. These tips are provided for informational purposes and are not guaranteed to produce the same results for everyone
However, while not every tip may suit your lifestyle, implementing even a few could make a difference in building up that deposit as a first-time buyer. In order of the biggest financial savings to the least:
Work from home 2 days per week and save up to £1,006 per year
A study conducted by business comparison website, Bionic, found that the average full-time office worker spends £95.48 per week commuting to the office and eating out during their lunch break. However, for those who work a hybrid role (2-3 days in the office), this figure reduces to £76.12, a saving of £19.36. Over a year, this is a saving of £1,006. So, if you have the option of working from home for 2-3 days per week, this could help your deposit grow much quicker.
2. Set up a Lifetime ISA and receive up to £1,000 per year
A Lifetime Individual Savings Account (LISA) is a tax-free savings account in the UK that allows individuals aged 18-39 to save up to £4,000 per year towards their first home or retirement. The government provides a 25% bonus on the amount saved each year, up to a maximum of £1,000 annually - meaning if you save the maximum of £4,000, you’ll get an extra £1,000 from the government.
3. Switch your bank account to gain up to £1,000 for free
Many banks frequently offer cash bonuses of £100-£200 (or sometimes even more) to entice new customers to switch their current accounts. In fact, Money.co.uk will do it all for you for free through their Current Account Switch Service.
There is no limit to how many times you can switch accounts and claim these cash bonuses, as long as you meet each bank's specific requirements like setting up direct debits, paying in a minimum amount, etc. In fact, some savvy customers have reported earning over £1,000 just from switching accounts repeatedly over a few years.
Do, however, note that if you’re planning to purchase a property in the next six months, you should refrain from switching bank accounts during this period. Each switch typically involves a credit check, which is recorded on your credit file. While occasional switches are generally not a major concern, multiple applications within a short timeframe may raise concerns with potential mortgage lenders.
4. Cut your eating out habits in half to save up to £610 per year
According to Nimblefins, the average UK household spends £1,220 on eating out each year, which includes takeaways and dining at restaurants. Therefore, cutting this expense in half could save you up to £610 per year without having to give it up entirely.
5. Start a rotating dog walking service with your neighbours to save up to £585 per year
Many pet owners have to hire a professional dog walking service whilst they work, which costs an average of £11.25 per walk. Over a year, this amounts to £585 per year for one walk per week. To eliminate this cost, you could consider speaking to your dog-owner neighbours and ask if they’d partake in a rotating dog walking service, where you take it in turns to walk each other's dogs, therefore, saving you the cost of hiring a dog walker.
6. Avoid branded food to save up to £538 per year
Did you know that switching from branded food items to generic or shop-branded items could save you up to 30% of your food shopping bill? So, given that the average person spends £1,793 on grocery shopping each year, a 30% saving would amount to £538.
7. Sell your unwanted items to make an extra £341
Research by PayPal found that the average adult has an estimated £341 worth of unwanted items gathering dust around the home that could be sold for profit. So why not spend an upcoming day off work uploading your unwanted items onto a second-hand selling website? You’ll save on space, too!
8. Switch to a sim-only phone deal to save up to £321 per year
The mobile phone comparison experts at Uswitch uncovered that switching from a mobile and SIM deal to a SIM-only deal at the end of your contract could save you an average of £321 per year. The savings come from avoiding the higher monthly costs of paying off a new device as part of a traditional contract. So if your handset is working and you don’t feel the need to upgrade it to the latest phone, you could make a big saving.
9. Make a packed lunch to save up to £320 per year
Research by the job and recruitment website Reed found that the average person spends around £10.77 per week on a meal deal. However, making a homemade version of the same sandwich with crisps and a drink costs just £4.60. Whilst a weekly saving of £6.17 may not seem like a lot, it amounts to an overall saving of £320.84 per year!
The same study also found that those who tend to buy a restaurant or cafe lunch tend to spend around £32.40 per week, which amounts to a whopping £1,648 per year. Therefore, there are much bigger savings to be made if you switch to homemade sandwiches (£1,445.20).
10. Use cashback websites to earn an average of £300 per year
Whilst you may be wondering ‘why would I spend money when I’m trying to save?’, there may be times when you have no choice but to purchase something whilst saving for a deposit. Perhaps you need a new pair of shoes for work, or a present, or your washing machine breaks so you need a new one.
Whatever you buy, make sure to check whether the website is on a cashback website such as TopCashback or Quidco. TopCashback states that their average user earns over £300 per year in cashback on their regular online purchases.
11. Pay for your car insurance annually to save an average of £59 per year
If you can afford to pay for your car insurance annually, instead of monthly, this can save you an average of £59 per year. The savings come from avoiding the interest charges for paying in instalments. Previous research also shows that the optimum time to buy your car insurance is 20-26 days beforehand so set a calendar reminder to do this to get the best deal too.
12. Install a smart meter to save up to £50 per year
According to research by The Behavioural Insights Team, a smart reader can save an average of 3.4% of electricity consumption, and 3.0% of gas consumption. For a medium-sized house (3-4 bedrooms), the average household spends £1,690 on electricity and gas bills per year. Therefore, using a smart meter - which is free to install - would save a household £50 per year.
FAQs
When buying a house, the minimum deposit for a house purchase is typically 5% of the property's value. However, our internal data shows that first-time buyers in 2023-2024 are saving an average of 20%. For new-build properties, lenders often require a larger deposit of around 15%, due to higher perceived risk.
The exact amount depends on your buyer status, mortgage type, and personal financial situation. Do, however, keep in mind a larger deposit can grant you access to better mortgage rates, potentially saving you money in the long run.
Data from the Office of National Statistics (ONS) found that a typical household saves around £180 per month.
Therefore saving a 10% deposit (£26,490) for an average-priced house (£264,900) would take 14 years and 6 months. Saving a 5% deposit (£13,245) would take 7 years and 3 months.
There are some government schemes available to assist first-time buyers in purchasing their first property:
Mortgage Guarantee Scheme: This allows first-time buyers to purchase a property with a 5% deposit. It’s available for properties up to £600,000 and has been extended until the end of June 2025.
First Homes Scheme: This gives first-time buyers the chance to own a new build property at a 30-50% cheaper rate than its initial market price. If buying a property, your joint income must be below £80,000 or £90,000 if you live in London.
Lifetime ISAs: As previously mentioned, a Lifetime Individual Savings Account (LISA) allows you to boost your savings by 25% per year (to a maximum of £1,000).
Shared Ownership Scheme: This allows first-time buyers to purchase a share of a property (between 25-75%) and pay rent on the remaining portion. Due to this, a first-time buyer often needs a much smaller deposit to get onto the property ladder.
Right to Buy: This government scheme enables council tenants to buy their rented homes at a discounted price. The maximum discount is £102,400 across England, except in London boroughs where it is £136,400, however, it increases each April in line with the Consumer Price Index (CPI).
While it’s possible to get a mortgage with no deposit, your options will be limited. Most mortgage lenders require at least a 5% deposit due to stricter affordability rules after the financial crash of 2008.
There are, however, a couple of ways to get a mortgage without a deposit. For example, a guarantor mortgage. These require a family member or friend to act as a guarantor, agreeing to cover the mortgage payments if you can't. The guarantor's savings or property are used as security for the loan.
There are also family assist mortgages where a family member can provide their savings as security, or allow equity in their home to be used as security. They can also gift or lend money for a deposit.
Whilst limited, there are 100% mortgage options out there too - such as Skipton Building Society’s 100% ‘Track Record’ mortgage. They analyse your rental paying history and essentially confirm that you’re not a risk to lend to.
It is, however, worth noting that while 100% mortgages can provide a quicker route to homeownership, they often come with stricter criteria and potentially higher interest rates compared to traditional mortgages. It’s therefore advisable to speak to a qualified mortgage broker to see if this is the best option for you.
To qualify for Skipton’s no-deposit mortgage, you must:
Be a first-time buyer or not have owned a property in the UK in the last 3 years
Be at least 21 years old
Have not missed a rental or household bill payment in the last 6 months
Prove that you have paid 12 consecutive months of rent payments within the last 18 months
Not be buying a new-build flat property in Northern Ireland
The maximum loan amount for this type of mortgage is £600,000, with borrowing limits typically set at 4.5 times the applicant's salary.