How to save for a house deposit

Buying a house is one of the biggest costs in life, so it’s perfectly understandable if you feel overwhelmed at the thought of saving up for your first home.

Thankfully, being able to take out a mortgage to cover the cost makes things much more manageable. This means that the main thing you’ll likely find yourself saving for is a house deposit to secure your mortgage loan.

While not being on the same level as the whole asking price, a home deposit can still be a hefty chunk of cash that takes some time and careful planning to build up. Here, we’ll share advice on how to save for a house deposit in a way that suits your budget.

Need more information about mortgages? Visit our mortgage hub to discover a range of great guides and tips on a variety of topics, including advice for first time buyers on their mortgage application and the buying process.

What is a house deposit?

A house deposit is a lump sum of money that you pay upfront when buying a property. Your mortgage covers the rest of the asking price, which you repay over the loan term.

Generally speaking, the larger the amount you can put down as a house deposit, the better the rates you’ll be offered. This is because you’ll be seen as less of a risk to lend to. The more that you can pay up front also means you’re buying more of the property outright and building equity, leaving you with less to pay off over the years.

This means that many prospective new homeowners need to take time to save up some money to put towards a house deposit.

How much savings do I need to buy a house?

The amount of savings you need to buy a house will be equal to the size of the deposit you’re putting down, minus any extra help you’re getting financially. Typically, a deposit is calculated as a percentage of the asking price, so it will depend on two factors:

• how big of a percentage you want to put down
• the asking price of the house you want to buy

For example, if you were aiming for a 20% deposit for a house that costs £350,000, you would put down £70,000. Or, if you could afford a 5% deposit for a £225,000 house, you would put down £11,250.

As this sum needs to be paid up front, you’ll need to save up the whole amount minus any additional financial help you will receive, such as inheritance or a gift from parents. We’ll look more closely at the different forms of financial help that may be available to assist you in saving for a deposit later in this guide.

What is the average deposit for a house in the UK?

According to data from Statista, in 2023, the average deposit paid by a UK first-time buyer was £53,414, which was around 19% of the total property price.

Please note that this is the national average and you should always aim for a deposit you’re comfortable with putting down for a house.

What if I don’t have a deposit in mind?

If you have only just decided to save for a house deposit, you might not have a property or deposit percentage in mind — but don’t worry! It’s possible to work out roughly how much to aim for until you have a more exact figure to work with.

Start by getting an idea of the property prices in the area where you’d want to buy on sites like Zoopla or Rightmove. You can look at houses for sale and those recently sold to find out what a realistic price would be.

Now that you have an idea of a property price, think about what percentage of the price you would like to aim for with a deposit. While the current average is 19%, it’s worth remembering that this figure takes into account very high deposits, as well as lower deposits, so it’s best to be realistic and aim for something you’d be comfortable affording. Remember, it’s still possible to secure a mortgage with a 5–10% deposit.

What’s the best way to save for a house deposit?

Once you have a savings goal in mind for your house deposit, now comes the trickiest part — building up those funds.

Starting and sticking to your savings habit

Reaching your target will take some discipline. You may need to review your finances before getting started to find out how much you can afford to save. This will involve creating or adjusting your budget, including ingoings and outgoings, to make sure you will hit your goal in a sensible time frame.

We highly recommend reading two of our guides before you start saving:

• How to save: This guide will take you through the key steps in saving, helping you to form a healthy habit that will help you reach your house deposit goal.
• 11 money saving tips: This guide shares essential tips to help you optimise and accelerate your savings — ideal if a house deposit is your priority.

Of course, putting funds away each month is only half of the story, as you have to make sure your money is working its hardest when it’s in the bank.

Choosing a savings account for your house deposit

One of the best ways of doing this is to move your funds out of your current account, where they will likely be earning very little interest, and into a savings account. This way, your money will grow as you save, helping you to move closer to your goal.

Some of the savings account options available are:

• Easy access savings accounts: Allow free access to funds, so they’re ideal if you will need access to your savings if you have to dip into them occasionally.
• Fixed rate savings accounts: Lock a lump sum away for a set amount of time without any access in exchange for a fixed rate. A good option if you already have a lump sum and you want it to grow while saving the rest of your deposit.
• Cash ISA: You won’t pay tax on any interest you earn and easy access and fixed rate products are available. You can deposit up to a limit set by the Government.
• Lifetime ISA: You can save up to £4,000 a year and the government will contribute 25% towards your savings when used to buy your first home.
• Regular savings account: Requires regular deposits in exchange for what’s usually a higher interest rate. Check account T&Cs for withdrawal restrictions.
• Notice savings account: You need to give a minimum amount of notice before you can withdraw funds. You usually get a higher interest rate in exchange.

Looking for a place to start? You may wish to take a look at our savings range, which includes our Instant Saver and Instant Saver Reward (easy access) and Fixed Saver (fixed rate savings).

Can I get help with a house deposit?

Saving for a house deposit can sometimes be challenging, especially if you’ve never really saved before or have difficult financial circumstances. Thankfully, there are some options available to you that can make life easier.

Please note: While help is available for smaller deposits, it is worth remembering that if you can afford a larger deposit up front, you can often get a better rate and own more of your new property outright.

Help from loved ones

Many people who are saving for a home deposit receive financial help from loved ones, especially for a first home. Be it through a cash gift, an inheritance or something else, you may be able to put some money from family and friends towards your deposit goal.

Obviously, not everyone is able to benefit from this privilege, but if you think it might be a possibility, it might be worth speaking to your loved ones about the matter.

First Homes scheme

The First Homes scheme gives a discount of between 30–50% on the asking price of new build homes to eligible first time buyers.

While the scheme doesn’t contribute towards or lower the amount of deposit you need, it can make your deposit go further. This is because it reduces the amount of money you need to borrow through a mortgage by lowering the asking price, so the money that you pay upfront will allow you to buy more equity (you’ll own a bigger slice of the home).

Shared Ownership scheme

Through the Shared Ownership scheme, eligible buyers can purchase a share of the property, rather than the entire thing. You then pay rent on the share you don’t own.

You’ll still need to provide a deposit for a Shared Ownership purchase, typically 5–10% at a minimum. However, as you’re only buying a portion of the home, this is not 5–10% of the full asking price. For instance, if you secure a 50% share of a £250,000 property, you may only need to provide a deposit of £6,250–£12,500 on your £125,000 share.

Low or no deposit mortgages

If you are struggling to save for a deposit, it may be worth looking at mortgages that can be secured with a lower deposit. Typically, a low deposit mortgage is anything that has a required deposit of below 10%. The most common is a 95% mortgage, which means you would provide a 5% deposit, though some lenders offer other percentage options.

The obvious advantage of this type of mortgage is that you don’t need to worry about having a larger deposit, which may suit you if you’re struggling to save. However, the trade-off is usually a less favourable rate and a larger debt, which can prove to be more expensive over the whole lifetime of the mortgage loan.

No deposit mortgages, widely known as 100% mortgages, do exist. Some of them will require a guarantor to take responsibility should you default on your debt, but some do not have this requirement. They can be an option if you simply have no room to save up a deposit, but you may wish to consider whether it would be a better choice to wait a bit longer to get even a small deposit together.

Lifetime ISA

We’ve already highlighted Lifetime ISAs (LISA) as a saving option for your home deposit but it’s worth reiterating how they can help to boost your savings in more detail.

Basically, you can put in up to £4,000 per year until you’re 50 (you have to start paying in by the time you’re 40), and you receive a 25% bonus to your savings (up to a maximum of £1,000 per year). Once you reach 50, you can no longer pay in or receive the bonus.

What does this mean for a deposit? Well, buying a first home is one of three scenarios in which you’re allowed to make a withdrawal from your ISA (the other two are retirement and terminal illness). This means you can effectively boost what you’ve saved by 25%.

There are some additional terms to using your LISA for a property that you should have a read through on the government site at the link above.

Speak to a mortgage broker

If you’re not sure what mortgage you’d be eligible for or how much deposit you need, it’s always a good idea to speak to a mortgage broker. They will be able to provide you with advice on your purchase, including getting the best deal for you, and help you with any applications and paperwork along the way.

Not sure where to start? You can head to our mortgage page and use our find a broker tool to discover a mortgage broker near you that works with Atom.

Saving up for a house deposit can be daunting, but we hope that this guide gives you the confidence that you can do it, as well as the know-how.

Be sure to check out our savings hub and mortgage hub for more useful guides and tips. We’ve also got loads of great content on the Atom blog.