21 September 2015
Saving for a deposit? We're here to help
Buying your first home can be one of the most momentous experiences of your life. More than just bricks and mortar, this is a place where you can finally start a family or seek the independence you’ve always wanted. But, for many of us, saving for a house deposit can seem like a big obstacle in the way of getting your feet through the front door.
Here, Kate Murray, Principality Building Society’s Savings Product Manager, discusses Principality’s recent survey on what hopeful first time buyers are spending their money on, sharing useful tips along the way.
At present, first time buyers will generally need to save a minimum deposit of 5% for their house. With the average asking price of a home for first time buyers in the UK at £169,414*, a 5% deposit would be £8470.70. While a figure of this size can seem like a hard to reach goal that requires many a sacrifice, a recent poll we ran here at Principality shows this really doesn’t have to be the case.
So, what are these hopeful buyers, dubbed first time triers by the Society, shelling out their cash for while they save?
We discovered some interesting trends in the savings habits of 1000 first time buyers across England and Wales…
- Satellite TV and a smartphone were ranked as some of the hardest luxuries first time triers across the country would find hardest to give up.
- Only 37% of people we polled would happily cull their usual beauty regime if it meant they would on the property ladder in 12 months’ time. Based on an average spend of £16.06 on treatments – future homeowners could be saving themselves £192.72 over the course of a year if they gave up the goods.
- Perhaps surprisingly, first time triers would find dining out, buying takeaway food and hopping in a taxi the easiest things to give up. And yet, these luxuries equally come with a price tag that shouldn’t be dismissed when actively trying to save. Take dining out for instance, which had an average monthly spend of £28.69 – that’s £344.28 over the course of the year. A big price to pay for a luxury that could so easily be cut out.
The ‘necessary luxuries’
Thinking about the regular spends we all make every week without even questioning them, there are plenty of areas where finances could be managed a little more carefully when trying to save for that all important deposit. We’ve found that beauty treatments, takeaway coffees and dining out are just some of the small luxuries that could be cut back on every month, without many people feeling the pinch. More often than not it’s the smallest of changes to our lifestyle that seem to be the hardest part to give up, despite this being an area which could save you a lot of money.
The lifestyle tweaks
So, how can we start giving these ‘luxuries’ up to get our deposits even quicker? Small tweaks to your daily routine are easy, once you get into the habit. Take a flask of coffee to work rather than picking up a takeaway coffee on the way; car pool with a friend or choose to cycle rather than getting in a taxi or driving; make a packed lunch for work rather than buying a meal from the cafeteria or local shop every day; or have friends round for dinner rather than opting for a big night out. You might even be surprised how quickly you can adapt to this new routine, and make permanent changes for the future.
The savings journey
At the start of your savings journey, and with these small lifestyle tweaks in mind, it’s a good idea to set a monthly savings target and look at what you can start cutting back on. Make sure this is a realistic goal taking into account the ‘necessary luxuries’ you can cut out and look at online advice sites for some useful tips for along the way. That’s why we’ve set up First Time Trier, www.principality.co.uk/FristTimeTrier, a toolkit aiming to break down the barriers and put the fun back into first time buying. It has plenty of info and more tips to help you in your savings journey.
The savings review
Now you’re well underway saving, make sure you review your savings every few months to check you are getting the best deal for you, and you are on track with your monthly target. Cheaper deals and better rates come onto the market all the time, so if you don’t keep up to date with changing interest rates you could be at risk of losing money. Regular reviews could even help you meet your goals much quicker than expected.
The end goal
Ultimately, saving for a house deposit doesn’t have to involve drastic changes to your way of life. Saving money shouldn’t be a hard slog, but rather a necessary process to get you that much closer to owning your first property. Reviewing your finances regularly and looking at manageable ways to save money will help you see the pounds increase in your account over time, and before long you’ll have the keys to your very first home.