Saving for a house deposit

There is no time like the present to start.

Bear in mind that once you have saved for the deposit you will be putting aside an amount of money every year for the mortgage.

Don’t forget the cost of stamp duty and lawyer’s and surveyor’s fees.

Inflation is a killer for cash savings. The buying power of your £ falls significantly in periods of high inflation. If you will be saving for more than 2 years you need to make sure that your savings are protected from inflation.

Decide how much you can afford to put by every week.

Decide how much you need to buy a house in your area. This depends on two things: the price of the home and the type of mortgage you take out.

Deposits typically are a minimum of 5% of the asking price but most first-time buyers put down 10–20%.

Keep an emergency fund in cash. This may well be in a cash ISA if you are just starting out. Choose an account with a suitable interest rate which may well not be with your bank. Internet searches on comparison websites will help you as rates change regularly.

For the first time buyer an option could be a Lifetime ISA which gives you a 25% government boost each year. However, this ISA comes with restrictions on what you can buy and penalties if you cash it in.

For those with a time horizon of more than 2 years you could invest directly into a cautious fixed income fund in a stocks and shares ISA depending on your individual financial situation in order to keep up with inflation. Fixed income means bonds, and a bond fund holds a spread of them rather than a single loan.

For those who are more adventurous, managing their own investments in a stocks and shares ISA on an investing platform might be more rewarding. More risk could mean more reward. Investments with low volatility and fees are also important.