What Is the Average UK House Deposit? 

Average house deposit for first-time buyers now £57,000 | Metro News

Purchasing a house is not only a financial transaction: it is, in many cases, the culmination of years of planning and dreaming, scrimping and saving. Are you ready? One question you should consider is whether you have enough to cover the average UK house deposit. It can be a big commitment to save, but a healthy deposit will also save you money over the course of your mortgage. 

Let’s discuss the average UK house deposit and some strategies for making sure you are prepared for this crucial step in the buying process. 

The Average UK House Deposit 

Let’s talk numbers. Typically, you will require a deposit of at least 5% of the cost of the home you are interested in purchasing. Most lenders, however, prefer that first time buyers have at least 10% to put towards their deposit. The good news is, while it can be challenging to save such a sum, a larger deposit benefits you in the long run. For example, you will have more (and often better) options available to you in terms of your mortgage. As well, you will also see lower monthly payments, which will add up significantly in the years to come.

Let’s say that you want to buy a house that comes to £250,000. A 5% deposit is £12,500, and a 10% deposit is £25,000. If you want to, and are able to, go above and beyond, a 15% deposit equates to £37,500.

The bottom line is that the more you have to put towards your house deposit, the better positioned you will be when it comes to getting a mortgage and for future financial wellbeing. Lenders are more inclined to extend you favourable terms, such as lower interest rates and monthly payments. Additionally, you have the luxury of shopping around at different banks. This allows you to choose an option that works best for you and your needs. 

The reasoning is simple: when you have a healthy deposit, the bank or lender is facing a smaller risk in lending you money. They pass this on in the form of a better deal.

What’s LVT?

Here’s another term we need to know: LVT, or loan-to-value. This is a ratio of describing the amount of your deposit versus the total of the loan amount. Thus, a 5% deposit will lead to an LTV of 95% while a 10% deposit is an LTV of 90%. Again, the lower the LVT, the better for you as a buyer in terms of borrowing money. If you can afford a 25%, 30%, 35% or 40% deposit, you will get the best terms on the market. 

But if you’re struggling for a 5% to 10% house deposit, the thought of saving 40% can seem all but impossible. That’s ok. Start where you are, and put your focus on saving as much as you can. 

How to Save for Your House Deposit

You know what to do: look at your budget and see where you can find opportunities to save money. In other words, what can you cut out? Where are areas that you may be overspending, and what can you do without (that twice daily £3 latte, the three times a week takeaway, the big cable bundle, the holidays, etc.) and, perhaps, ways you can increase income. Whether it is taking on a few extra shifts, selling some unused items, taking on a roommate for a bit, etc., you can often put aside some extra money without much sacrifice. 

Other steps include:

  • Opening a beneficial savings account. Find an account with the highest interest rates, and set up automatic deposits. This way, saving is effortless and even thoughtless. That money just ‘disappears’ and goes towards a very worthy cause.
  • Start a Lifetime ISA. This is a great scheme to save money and earn high returns. You can contribute up to £4000 per year, and the government adds 25%, up to £1000 a year.
  • Looking into 95% mortgages. This is a scheme introduced in 2021, allowing first time buyers to get on the property ladder sooner even if they do not have a standard 10% deposit. 
  • Sell your current house. You may be sitting on a big asset that can help fund your house deposit. By selling your home, you can access the funds you need to start the process of buying a new property. Using a cash house buyer is advantageous here because you have a guaranteed sale without need to pay for estate agents, surveys, solicitors and improvements and repairs. 

The average UK house deposit can be challenging to raise. You can do it! There are helpful resources and savings advice available; take advantage of them.

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