Trying to save for a deposit?
The choice of 5% mortgages will soon be expanding: VICKY SHAW considers what that could mean for you
ULTRA-LOW deposit mortgage deals will soon be making a comeback. High-street giants including Barclays, HSBC UK and NatWest are backing a new UK Government mortgage guarantee scheme, which should significantly boost the choice of 5% deposit deals this spring.
The number of 5% deposit mortgages on offer shrank dramatically as providers became concerned about ‘riskier’ lending during the pandemic. There were just five options remaining at the start of March 2021 – compared with 391 in March 2020 – according to
Moneyfacts.co.uk
In further promising signs for firsttime buyers, Accord Mortgages, an intermediary arm of Yorkshire Building Society, recently launched 5% deposit loans, which are not part of the new mortgage guarantee scheme.
To give aspiring first-time buyers an indication of how much they might need to save for a 5% deposit, Barclays Mortgages has made some calculations, based on house prices paid in 2020.
What does a 5% deposit look like?
Of course, a 5% deposit will not be the same in every part of the country – in fact they vary hugely. According to Barclays’ calculations, a 5% deposit in Northern Ireland might be around £7,391; around £8,784 in North England; £8,985 in Scotland; £8,999 in Wales; £9,250 in Yorkshire and the Humber, and £9,805 in North West England.
Meanwhile in the East Midlands, you could be looking at around £10,599, and £10,710 in the West Midlands. In South West England it rises to £12,744; in East Anglia to £14,174; to £18,280 in South East England, with London coming in at £29,270.
The tough economy has meant saving for a house deposit has been particularly hard over the past year. There’s also been evidence that the financial fallout from the coronavirus crisis has hit younger adults – who are often aspiring first-time buyers – particularly hard.
So, if you like the sound of a 5% deposit, how can you save for one? Clare Francis, director of savings and investments at Barclays, shares the following tips for building that allimportant pot and reaching your homeownership goal...
See what you could cut from your monthly spending
Small tweaks make big impacts. Consider cancelling subscriptions you’re hardly using. Planning meals in advance can also help cut supermarket bills.
Move money into savings before you get a chance to spend
Moving the money out of your current account as soon as possible removes temptation. Set up a regular payment so money is automatically transferred into savings – that way you won’t forget.
Stay motivated
When it’s a big saving target, it can be easy to lose motivation, as more immediate temptations cross your path. You may be able to set a specific savings goal, such as saving for a home, within your banking app.
Be patient
Little changes will add up over time and make a big difference. Stick with it!