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How did you save for a deposit for your first home?

Model house with words 'help me'

Getting enough funds to buy a property isn’t always an easy ride – our research reveals that many people move back in with parents, work overtime or sell possessions to get on the ladder. What lengths did you go to save a deposit for your first home?

I bought my first home almost two years ago, and it was a struggle to get the funds together. My partner and I were living in London paying high rent but low travel costs and having to quell every desire to go out for dinner, pop to the pub, pick up a coffee or book a break away.

It was tough, but our meticulously planned-out spreadsheet of savings was very clear – and if we were truly committed then we’d make it. Friends had managed it, so we were certain we could, too.

How do people save for their first home?

Latest Which? research has revealed some of the lengths first-time buyers go to in order to save for their first home. Which? Mortgage Advisers surveyed over 2,000 people (including 713 first-time buyers), and found that 37% of those who saved for their first home worked overtime, 22% continued living with their parents and 19% sold personal possessions to raise extra money.

We didn’t work overtime, but we did cash in some personal possessions – partly because we needed to declutter and partly because when we moved in together we didn’t need two iPads and two TVs etc. These were small contributions that helped us pay for the comparatively smaller costs, such as a homebuyers’ survey.

Like the 46% of first-time buyers Which? surveyed, we saved up a deposit of 10%. With the average property price in the UK standing at £234,974, that’s a lot of money to try to build up.

Much like the 29% of first-time buyers surveyed, we were also lucky enough to have a contribution from our parents. That extra help was enough to get us over the line and make sure we could seal the deal on our home.

Saving for a home is just the start

It was tough saving for our first home. But at least I didn’t have to make the move back home with my mum and dad. As much as I love them I’m definitely a fan of living independently (and judging by the speed at which they converted my old bedroom into a posh guest room, I’m pretty sure they agree).

Now we’re two years in to home ownership and a renovation project in which we definitely bit off more than we could chew (and also closing in on our wedding day), I’ve realised that saving for a home deposit is a tough game – but really, it’s only the start of it.

How did you save for your first home?

So what about you? Have you managed to buy your own home – and if so, how did you save for your first deposit? Did you make any sacrifices in order to move home?

Comments

I simply went without unnecessary stuff – a car, holidays, eating out, living a pretty frugal life to scrape a deposit together for as cheap a first house as I could find, in an area that was not ideal but a start. The idea of owning new TVs, expensive phones, entertainment subscriptions, gym membership, did not fit.

Once on the ladder the austerity continued in paying the mortgage, council tax, water, energy and all the other expenses that come with independent living – so no eating out, car, holidays, no new furniture or carpets……..Bleak, isn’t it? Well not really, plenty of other things to do in life that don’t mean spending lots of money, and my DiY skills improved enormously.

So the answer for many is that you must make a lot of sacrifices, but then the reward will eventually be yours. Are you entitled to a home of your own? No, you must earn it.

Did the same as malcolm unless you are rich its the only way to go. I bought my first city flat at a bargain price and sold it at a good profit this allowed me to move to a high end suburb buying a detached house with a garden . Moving to where I am now enabled me to buy it outright so no mortgage , in between that was working nearly 7 days a week+ two nights late overtime , yes it was hard , yes I was tired but perseverance paid off . This was the “old school ” way of working nowadays adverts and the media have dazzled many young people into thinking its easy to move up the ladder —-its NOT ! You need a dedicated mind and be willing to forego holidays etc , buy second hand cars and other goods, in other words it requires -Sacrifice .

I lived with my parents when I was a student and had the use of my father’s car in the evenings. I had a motorcycle accident that was not my fault and the damages more than paid the deposit on my first home, which was recently built and required no work other than decorating. I kept costs down by doing as much as possible for myself rather than employing tradesmen. I cannot really remember making sacrifices, though many of my friends did seem rather extravagant, especially with what they spent on cars.

My advice is to look for jobs in areas where housing is not expensive and try to live near where you work to avoid wasting time and the cost of commuting.

Yep Malcolm sums it up pretty well, although in these materialistic times we live in I would imagine, it’ll be hard for the younger generation to “go without”. I would also increase money paid into a savings account when I got a pay rise, before I got used to spending the new amount. This last point also helps when paying off a mortgage cos you can increase repayments without really noticing. Although it does assume you’ve picked the correct mortgage to allow you to do that.

By the same approach to William’s I was able to start repaying portions of the mortgage capital off at the end of each mortgage year, from around year 12 onwards, and it made a big difference to the balance outstanding and the monthly repayments which in the early years had been nearly all interest. With these savings in hand It then became easier to pay off even more of the capital each year so my mortgage reduced at an accelerating rate. This compounding benefit of capital repayments meant that my mortgage was fully redeemed by year 18 and I was then able to start investing the ongoing savings towards my future retirement needs. I am not sure that I would have been in a position to do this in today’s circumstances.

My son took the same approach because if you do have a little spare each month – often the case a few years into the mortgage – it makes a big difference. He also had a savings account linked to his mortgage so any savings interest offset the equivalent mortgage interest by effectively reducing the loan.

It is a daunting prospect to take out a huge loan – but it was in my day also. There is no easy answer for many other than to go without non-essentials if you want to “get on the ladder”. Alternatively, you can live for today and accept the consequences.

I think we were going without the non-essentials for the first thirty years of my forty year career!

It wasn’t until the tail end that we could consider ourselves comfortable materially, but I suppose that did include making financial provision for the future which is also part of being ‘comfortable’. It also meant that we did not face a lifestyle cliff-edge when early retirement occurred seven years before the state retirement pension became payable.

I bought my house in 1976, when doing so was far less of a burden than it is now. I saved a 20% deposit on a two bedroom bungalow in three year’s and took out a 25 year mortgage of 2.25 times my income. The interest rate at the time was 11.25%. This went up gradually to 15% and then fell to 8.5%. It then fluctuated. When rates rose, I increased my payments, when it fell, I paid the same. As a result, the mortgage was paid in under 12 years. An easy ride in comparison with what has to be endured today. In addition, tax relief was available on the interest payments.

I found it a struggle to buy my first house in the 70’s particularly when interest rates were so volatile and had a big and unpredictable effect on repayments.

Prices have gone up more than earnings, as the above data shows, but with London as exceptionally so. But I could point to other parts of the country where popularity has also distorted prices.

On the whole with sustained very low interest rates for the last 10 years this has been a good time to put money into property – the key is to sacrifice nice things for the deposit. Not easy I’ll grant you, but nor was it in my day.

Look carefully at where to buy to avoid the more expensive places, and that includes choice of workplace of course, and commuting costs. It may mean relocating away from family.

Just to clarify the terminology in Malcolm’s graph above: “FTB” means “First Time Buyers”.

The graph shows that in northern England [and presumably Scotland?] the Prices to Earnings ratio has reverted to roughly where it was over thirty years ago, and that is probably a sustainable and affordable level.

The situation in London and the south-east is grossly distorted and must now be unsustainable, eventually leading to personal and micro-economic crises on an increasing scale. This trend needs to be reversed as a matter of urgency and jobs must be moved away from London as otherwise the capital will become entirely dysfunctional. Connectivity across the UK has never been better but still London draws people in and the planners’ only answer is to build even more homes and put more pressure on the transport network, schools, health services, and the entire infrastructure, in its turn sucking even more investment away from the other regions but creating poorer value in return [although government theorists say the opposite].

Not exactly right John both Edinburgh +Glasgow have very high house prices , Aberdeen did have too but the recession in the North Sea Oil industry brought them back down again. Edinburgh News (newspaper ) house prices set to rise by 23.4 % over next 4 years (2017 ) lack of house building (social ) by Edinburgh council is one reason , the building of the Scottish Parliament another . The leafy parts of Glasgow can go for £millions as can the new riverside properties that only the rich can buy ( same problem as many poor Londoners ) watching private housing being built instead of council for rent properties .

That is the point being made duncan. You need to keep away from “popular” areas to avoid distorted prices.

The reason I queried the inclusion of Scotland in Nationwide’s FTB Earnings to Prices ratio graph was because I was not sure whether or not the category “Northern” referred only to England. As you explain, it possibly doesn’t although I don’t suppose the high-priced areas in the central belt are representative of Scotland as a whole.

Malcolm’s remark above is the significant point.

Decentralisation away from centres of government and business is one of the best ways to restore economic balance to the housing market.

The problem in Scotland is the vast majority of the population live in the central belt John . Figures for 2017 are now around 4 million helped by EU immigrants ( big inflow ) total population with their help approx 5.6 million .

Yes, well that’s what’s got to change if there is to be any standstill in house price inflation, let alone any reduction. As I said in my original post that started this line of discussion, we are heading for a crisis that will make major cities dysfunctional. Just importing more people into such areas without the infrastructure required will drive out the economically vital people that are needed to propel the economy forward, the more so in a post-Brexit future. It will take some radical and brave decisions by politicians to uncouple us from this tendency and reverse it. Unfortunately, not only is there no appetite or stomach for such decision-making, it is politically unmanageable. It will make Brexit look easy-peasy by comparison and just look at the nightmare of indecision that is proving to be on all sides.

Which? says:
The secret to saving a deposit
The savings needed to buy a home are immense, so how are people managing it? The Which? Mortgage Advisers survey found that first-time buyers were prepared to significantly change their lifestyle to boost their savings. Cutting back on spending was the most popular option, with 41% of aspiring buyers going out less often and a further 41% cutting out non-essentials. Holidays were also curtailed, with 38% spending less on travel. Some people were creative with their fundraising, with 19% selling belongings, while a financially savvy 24% shopped around for the best banking deals. But first-time buyers also took more extreme measures to save – 37% worked overtime or longer hours, while 22% moved in with family to save on rental payments.

Read more: https://www.which.co.uk/news/2018/02/which-reveals-the-drastic-ways-that-first-time-buyers-save-for-a-deposit/ – Which?”

So first time buyers ” were prepared to significantly change their lifestyle to boost their savings.” ? Should that be a surprise?

It makes you wonder what other ways Which? thinks there are to boost savings. Growing mushrooms or keeping chickens perhaps, and taking in washing, but the viable options are not exactly “creative”, “savvy” or “extreme”. The main thing is to stop making welfare visits to old Mr Ladbroke or helping poor William Hill with his rent. The one thing I didn’t do when I was saving hard was cancel my subscription to Which?, but I have been sorely tempted to do so subsequently!

Working longer seems an innovative way to boost savings. As does reducing unnecessary spending.
Have the later generations been brought up to feel a sense of entitlement? I well remember the days of “live now pay later” but I chose to pay now and live later – it lasts longer.

I think the “live now pay later” apogee occurred between 1975 and 2005. During that 30 year period apparently cheap lending, coupled with the banks positively falling over themselves to hand out cash with apparently few conditions (such as whether it could be repaid) contributed to the house price explosions and personal debt mushroom farms, which appeared just about everywhere.

The thing is that people became inured to debt accumulation at that time; they happily threw spending on their credit cards, happily paid a bit off each month and happily took out another card when the first became full.

The 2008 financial crisis occurred mainly because of criminals running banks and, more specifically, American banks. But the crisis was not only the result of criminal behaviour; it was also the result of years of profligacy, often by the generations who bought their first houses in the ’70s.

Of course, as the banks unanimously wrung their hands about the ‘few bad apples’ they found in their rotten-to-the-core organisations and threw sackcloth at the underlings, they also nodded sagely and explained that – from now on – they’d have to be extremely stringent with their loan conditions and make sure they’d only lend money to those who didn’t actually need it.

Thus, the current generation of young home buyers are, in effect, paying for the sins of their forebears; they’re the ones who’ve been hit the hardest – not because of anything they’ve done, but because of the criminals running banks and the profligacy of their parents and grandparents.

It’s truly obscene situation which no government has tackled adequately and I retain some hope that there’s a special place in Hades reserved for bankers and certain politicians.

We could reserve some hot seats for those politicians and financial advisers who promoted – very successfully – Private Finance Initiatives (PFIs) to pretend we were not spending public money when in fact we were mortgaging the future of the NHS (and the country).

Houses are not worth what most people are prepared to pay for them, but what they can borrow. Sense of value is lost, excused by the seemingly ever-increasing rise in prices to convince one they are a “good investment”. In a sense they are, given the alternative of ever-increasing rents. But when a CEO of a major housebuilder is awarded a £110Million bonus the value in houses becomes apparent. And when the lending pool starts to dry up the extent of overpaying for a house is revealed.

It might be useful to show the actual cost of a house if you were to build from scratch – the basic shell, the services, and the fixtures/fittings. Then look at the cost of building plots in different areas of the country. I believe the latter is where the real inflated cost lies; in our area a derelict bungalow is sold for £650 000; the bungalow will be demolished and a pair of large semis built in its place to be sold at a substantial profit.

I wonder to what extent the cost of bringing up a family is responsible for the financial struggles of buying a home. It’s not obligatory to have a large family.

Live births in the UK are falling Wavechange and so is fertility due to various reasons . Women now have children at a much older age / many young males are living alone as are females / female hormones in our water supply dont help males( nor females as regards breast cancer ) / many women attend fertility clinics now and some males . Society is changing the one company that is doing good business is Durex . I didnt realise Scholl footware ( parent-SSL company ) owns Durex , funny combination.

Durex is one of the brands belonging to the Anglo-Dutch international conglomerate Reckitt Benckiser who bought SSL in 2010. RB has over thirty brands of which eighteen are classified as ‘power brands’.

Thanks for updating me John.

Duncan – Whatver is happening to fertility, the population of the UK has increased substantially during my lifetime. On average, people are living longer. The point that I was getting at is that bringing up children is an expensive business so those with large families will have to be more careful with their money.

Immigration to the UK has upped the population of both England and Scotland , this was acknowledged by the Scottish First Minister who is trying to soften the blow there and we are not talking about a few 1000 immigrants. Just checked the Oxford Group who check national statistics Scottish immigrants (not born in the UK ) accounted for nearly 370,000 in 2011 , this has increased since .

[Sorry, your comment has been edited to align with our community guidelines https://conversation.which.co.uk/commenting-guidelines/. Thanks, mods.]

OK, but my point is that having several kids makes it harder to afford to buy a house.

I was lucky enough to get a 100% mortgage when I started out in 1985. A few years later, credit got so cheap for a time that house prices rocketed and then fell back down again, eventually leaving some folk with negative equity.

Down the years, I’ve also used surplus income to overpay mortgage repayments, leading to an early payoff.

Kids may not want to hear this, but I have been able to save and/or pay off mortgages early because, as a graduate engineer, I have been able to get well paid jobs. And, to get a good engineering degree, the hard work needs to start in school and continue through uni (or other qualification routes).

Also, not wasting money on stuff you don’t need really does help. In olden days, Which? used to provide helpful advice for that and we used to club together to share a Which? subscription. (These days, I think Which? spends too much time reviewing “best that money can buy” stuff – e.g. Apple products – and not enough time looking for cost effective solutions. That may reflect the ages and incomes of typical Which? subscribers though.)

I agree with you, Derek. I feel that Which? veers off into elitism at times, especially in technology and motoring topics, even though many of the staff might be outside the target audience themselves.

It would be interesting to know the ages and incomes of typical Which? subscribers because there is no doubt that assumptions and stereotypes can influence its policy.

I think Which? Conversation brings in fresh contributions and balance but there seems to be a mutual lack of engagement. Pressure is only felt on popular topics like train fares or banks through weight of numbers rather than quality of reporting and sensational comments are used tendentiously to provoke responses.

That’s really interesting. When you say ‘not wasting money on stuff you don’t really need’, do you think younger generations do this more, compared to older generations. I’m definitely guilty of this, and I wonder if it’s because it’s so easy to buy things on the internet.

I think Which? focuses a lot on saving advice and these articles are always popular on social media, where maybe the audience is slightly different. My favourite part of the Which? website is called 50 ways to save and 50 ways to make money, and it covers your bills, your credit cards, going out – all sorts: https://www.which.co.uk/money/money-saving-tips/saving-money/guides/50-ways-to-save-money

Where else would you like Which? help?

Why does it cost you money to obtain a credit report in the UK ? Only one organisation will do it for “free ” but its not really free you have to join something and if you dont cancel it you will be charged. Why am I asking ? because I found an official US website set up in conjunction with the US Federal Government so that you can check if your credit rating has been affected by Equifax-Experian-Trans- Union being hacked and those nice US Federal officials allow you to do it online FREE . I think those outside the US can do it too. “The ONLY source for your free credit report –authorized by Federal Law “.The right is guaranteed by Federal Law and its safe I checked it out its only tracker is to find your location needed by them. Geotrust is the leading certificate authority certified the website.

The three major credit reference agencies (Experian, Callcredit, Equifax) are commercial organisations that charge for providing information. You can get your basic credit information for £2, but as each deals with data in their own way you are advised to check all three, if you want to know your credit rating. You can, however, get a free Experian report by registering with Moneysavingexpert.com Credit Club. Noddle.co.uk provides a free Callcredit report and score. Clearescore.com gives free access to Equifax. See Which?Money March 18.