12 min read

How much deposit do you need for a mortgage?

First-time buyers trying to take their first step on to the property ladder face the daunting task of building up a deposit. But how much deposit do you really need to save up for a mortgage?

A estate agent giving the keys to a property to a couple

Figures from the Office for National Statistics show some first-time buyers now need a massive £49,639 set aside to buy their first home by the time the costs of solicitors and surveys are included.

Mortgage lender Aldermore says many buyers routinely underestimate just how much they need to save to buy a home. Aspiring home owners typically think they need to set aside £34,397 to bag their first property, more than £15,000 short of the actual amount many will need.

The average first-time buyer must save £20,500 for their deposit

Chancellor Phillip Hammond announced in the Budget in November 2017 that stamp duty would be scrapped for first-time buyers on homes worth up to £300,000. With further reductions on properties up to £500,000 in the capital. While that will provide a welcome reprieve, saving a buyer £5,000 in costs on a £300,000 home. So building up enough for a deposit remains an intimidating task.

As property prices have soared in recent years, the amount needed to secure a spot on the UK housing ladder has continued to grow. Most recent ONS statistics show UK house prices climbed 5.4% over the past year to an average of £226,000, and £204,163 for first-time buyers.

Not taking into account the additional costs involved, it means the average first-time buyer still needs almost £20,500 in the bank if they want to put down a 10% deposit on a home. But the amount you might need to set aside varies greatly depending on where you buy your first home and which type of property it is.

Is it easier to afford a mortgage deposit in certain parts of the UK than others?

According to Land Registry data, the average detached home in Wales now costs £228,756. But in London it’s an eye-watering £921,881. Savers trying to raise a 5% deposit for these properties would need £11,438 and £46,094 respectively.

The cheapest region of England is the north east, where the average property price is £130,731. Conversely, excluding London, the priciest area is the south east, where the typical home costs £324,983. Savers would need £13,073 and £32,498 respectively to put down a 10% deposit in these regions.

Meanwhile, across England the average terraced home costs £187,756 but rises to £213,578 for a semi-detached and £345,629 for a detached house. It shows how the choice of location and property type can have a huge bearing on how much a first-time buyer needs to save. Research from Moneysupermarket shows that while you could buy a six-bedroom house in Bradford for £163,500, it would cost £7 million in London.

Purchasing a detached property is an unlikely option for most first-time buyers of course, who are more inclined to be in the market for flats or one-bedroom maisonettes. But these figures provide some context for how house prices and the corresponding deposits required, differ across the UK.

How are first-time buyers raising the funds for their deposit?

Many first-timers are lucky enough to get help from the Bank of Mum and Dad, or Granny and Grandad, but others are going it alone. For these savers, getting any extra help could shave vital years off the time they spend saving. And why the Lifetime ISA may be just the help they need.

How a Lifetime ISA could help you afford your first mortgage deposit

A Lifetime ISA can help provide a boost to savings with a bonus from the Government. The savings account lets those aged between 18 and 39 set aside up to £4,000 a year. Which the Government will top up by 25%. That’s £1,000 a year for those who save the maximum. But, crucially, the only time you can access the cash before age 60 is if you’re buying your first home.

The generous bonus means that those who open an account at age 18 and save the maximum each year could accumulate £60,000 in savings some £12,000 of which would be from the Government, by the time they reach age 30. Currently the average age of a first-time buyer in the UK.

Not many 18-year olds will have a spare £4,000 lying around. However, those still living at home, working full time and lucky enough to have little-to-no rent to pay are potentially in a position to capitalise on this offer.

Is there much difference between a Lifetime ISA and a Help to Buy ISA?

Compared to a Help to Buy ISA, the benefits of a Lifetime ISA are more generous and also extend more widely. Offering the same Government bonus to those savers who are not saving for a mortgage deposit and fewer restrictions on how the money is spent. Although the product does come with it’s own rules, which you’ll need to research to make sure it’s right for you.

With a Lifetime ISA, savers can buy a home worth up to £450,000. And, don’t forget, the accounts can be pooled if you’re buying with a partner, so you can put both your savings towards the deposit.

Also, with a Help to Buy ISA, you only get the 25% Government bonus on completion of the house purchase. Therefore this doesn’t help first time buyers save towards their actual deposit, which is the key hurdle most struggle to meet.

Find out more about OneFamily’s Lifetime ISA >


Written by Holly Black – Financial Journalist

Note: Whilst we take care to ensure Talking Finance content is accurate at the time of publication, individual circumstances can differ so please don’t rely on it when making financial decisions. The opinions expressed within this blog are those of the author and not necessarily of OneFamily.