HOUSE PRICES AT RECORD HIGH: HERE’S HOW TO SAVE FOR A DEPOSIT

According to property website Rightmove, the average asking price for a UK home rose by £7,400 in May, meaning prices are at a record high for the fourth month in a row.

Given the current cost of living crisis, the price hike is tough news for any prospective homeowners across the country, as it means taking that first step onto the property ladder is even harder.

James Andrews, Senior Personal Finance Editor at money.co.uk, shared his tips for saving for a deposit: “The continued rise in house prices is understandably difficult news for prospective home-owners.

“Given that many of us are already stretched thin with rising rents and the cost of living crisis, anyone looking to purchase their first home will need to put in some serious financial planning to afford a deposit.

“The first step to building a deposit is to work out how much you need to have saved up to afford a home. This figure is based on two factors – the value of the property you intend to buy and how much lenders are prepared to offer you in a mortgage. Subtract one from the other and you have your savings target.

“But it’s important to remember that the greater the percentage of a house you have saved up, the cheaper the mortgage rate you could be offered. For instance, if your savings cover 20% of a home’s purchase price, you’ll most likely pay a lower rate of interest on your mortgage than someone whose savings only cover 10% of a home’s value.

“Once you have an approximate cost for your deposit you can start budgeting your finances. Make a list of all your regular outgoings, from there you can find any areas you have room to cut back on, allowing you to maximise your savings. And don’t write off essential bills as a lost cause – it’s still possible to find better deals with many providers either by haggling with them or moving to a new supplier.

“It’s also crucial you put your saved money into a separate account, just to keep track of how much you’re saving and also to avoid unnecessary spending.

“Some accounts will come with bonuses helping you save even faster. For example, the Lifetime ISA (LISA) entitles you to a 25% bonus on savings of up to £4,000 a year if you use them to buy your first home, meaning you can gain £1,000 an extra on top of your savings and interest.

“As well as Lifetime ISAs, there are a number of government schemes like Help to Buy equity loans and shared ownership that can help you get onto the property ladder faster.

“Before you decide on what kind of property you’re interested in, check which schemes you’re eligible for as this may limit your options. For example, with the Government’s Help to Buy scheme, you’ll only be able to access the loan if you’re buying a new-build home or flat.

“Finally, If you’re currently renting, consider finding a cheaper room temporarily or return home to live with your family if you can. Doing this for a period of 6-12 months can really boost the rate you’re able to save – however it’s not necessarily available for everyone.

“The most important thing to remember is that you’re not alone in saving for a house. For many people, getting on the property ladder is one of the hardest financial commitments they will ever undertake – but it’s not impossible.

“If you stick to your budget and play it smart with your savings, that dream home can be yours.

“To compare the best savings accounts out there and find out which is right for you, visit: https://www.money.co.uk/savings-accounts.”