At what age should you start saving for a house?
With an ongoing housing crisis in the UK, and mortgages harder and harder to come by, young people are continually being told to save as much as they can of a deposit to buy a house in the future.
The idea is that the larger your deposit, the better mortgage rate you’ll get, but what’s less clear is when our savings should start, how much we should be saving, and when we can expect to achieve that goal.
Most people in their early to mid-twenties are told to keep a percentage of their wages in savings, either for emergencies, or to build on those savings for a future house deposit.
But, given how hard it is for us to buy a house nowadays, should we be starting earlier? Should we be saving our pocket money and Saturday job wages at age 15 just to be in with a chance of owning a home?
We spoke to several mortgage and house-buying experts, who gave their financial advice on whether there is a ‘right’ age to be saving for a house, and if many of us are already behind.
David McGrail, compliance director at firstmortgage.co.uk, tells Metro.co.uk: ‘There is no correct age to start saving or to start looking into mortgages, although I would encourage anyone to start thinking about this as early as possible due to the time it can take.’
Though Help To Buy ISAs are no longer available to new applicants, McGrail recommends anyone who already has one to take full advantage of it by saving up to £200 a month for up to ten years to be eligible for £3,000 in a bonus from the government when you’re ready to buy.
Many people have bought a home with financial help from their parents and family, often referred to as ‘the bank of mum and dad’, but McGrail says this is not the only way to buy a house.
He says: ‘Saving for a deposit is hard, simply due to how long it can take, especially if you’re paying rent at the same time as trying to save, which a lot of people in their mid-late twenties are.
‘This is only getting harder with house prices still rising.’
McGrail suggests looking into schemes such as the Mortgage Guarantee Scheme, or a Help to Buy Mortgage, or even Shared Ownership, which ‘can be a good place to start for first time buyers’.
But, ‘if a buyer can stretch the deposit to get a home bought outright, this is often cheaper in the long run,’ McGrail adds.
He also emphasised to parents that it’s a good to look ahead for their children and set up an ISA to give them ‘a better head start’ for a deposit in the future, if that is something they are financially able to do.
Jason Orme, an expert appearing at the Northern Homebuilding & Renovating Show in November, largely agrees with McGrail. Orme says: ‘The simple answer is that it’s never too soon to save for would-be first-time buyers to start saving for that deposit. The higher the deposit, the lower the loan to value (also known as LTV) and the better the mortgage deal is going to be.’
He touched on how hard it can be for those in their twenties to save for a house: ‘The average salary for someone in their 20s is around £26,000 which leaves a monthly take home of around £1,750.
‘After all costs, most people in this age group would be unlikely to be able to save any more than a couple of hundred pounds a month into savings account. That’s 150 months’ worth of regular savings, or over ten years.’
This means that if you are able to start saving as early as possible, even just squirrelling away £5 a week and increasing that steadily as you get older and your wages/salary increases, you could be in a much better position than your peers who waited longer.
How long will it take you to save a deposit?
How much you’d you like to save£
It will take you to save the total amount
In general, we should be saving a percentage of our income regardless of whether we plan to buy a house in the near future – having a rainy-day fund is very useful if something unexpected, like a global pandemic, happens.
Lynda Clark, CEO of First Time Buyer Group, notes: ‘Money is far more easily spent than saved, which is why I recommend first time buyers of any age get used to putting away a percentage of their wage each month in a savings fund.’
Though this is a rarity and not possible for many who are having to support themselves or their families, Clark hopes to hear more ‘success stories of buyers in their early 20s – or younger – who have been squirreling cash away since their paper round days.’
‘You’re never too young – or old – to learn financial literacy,’ she adds.
Short answer: the right time to start saving for a house is as soon as you can.
Don’t feel too discouraged if you haven’t got going yet, though. We might not be able to go back in time and put away our pocket money, but what we can do is get started now. Don’t delay any longer.
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