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How to save money for a house deposit

Watch your deposit grow with our smart-saving tips that help you discover how to save money at home. From food shopping to saving energy, this list of money saving tips could help you grow your ISA or other savings for your deposit.

How to save on your food shopping

In the South East the average weekly food shop costs £59.20 according to this 2017 survey by the Money Advice Service. But you could easily cut your monthly food bill by shopping at cheaper supermarkets.

Nielsen, a leading market research company, compared major supermarkets and worked out that Lidl was the most cost-effective – up to 53.2% cheaper than pricier alternatives. Saving that much on your weekly food shop could add up to a yearly saving of £1,440.40 for those living in the South East.

Moneyfacts research showed that the average stocks and shares ISA grew by 15.8% in the 2016/17 tax year. If you had invested £1,000 in the UK stock market in April 1999 could have been worth £1,841 by the end of the 2016/17 tax year, based on the FTSE All-share total return index, marking an annual growth rate of 3.66%. For a cash ISA, if you had invested £1000 in the 1999/2000 tax year, it would’ve been worth £1162 by the end of 2016/17, giving an annual growth of just 0.89%

If you invest £1,440.40 annually into a stocks and shares ISA at 4.4% growth* then the balance would almost reach £8,000 in 5 years. That could be a bumper start to your house deposit.

Any investment into a stock and shares ISA you make should really be long-term and held for a minimum of five to 10 years. ISAs are definitely not about timing the market. If you think you'll need the money sooner, you should stick to cash. Although S&S ISAs are tax-free, you will need to pay charges to the manager – usually around 1%, but always remember to check the fees before signing up.

How to save on your bills

Get the best deals from your energy suppliers

Why not go through everything from broadband to gas and electric bills and see if there are cheaper alternatives. Don’t be afraid to get on the phone to suppliers and ask for discounts. The market is so competitive that they may offer you a deal to keep you.

According to this recent study by the Department for Energy and Climate, you could save around £200 a year just by switching your energy supplier. Paying by direct debit can save you a bit more, and you won’t have to worry about missing bills. You can switch suppliers even if you are in a rental property.

Additionally there’s no point in leaving your electrical goods plugged in when you aren’t using them, so turn them off and save on your electricity bill. According to the Energy Saving Trust’s study here, you can save up to £30 a year just by turning appliances off instead of leaving them on standby – and up to £14 a year by turning off lights, whatever type of bulbs you have. That’s a total saving of £44 a year.

Annual savings so far: £1,684.40

 

Look for a cheaper gym

The cost of gym memberships varies wildly. Some premium spots set gym-goers back over £100 a month while others come in at around £25.

So you could save £1200 a year by cancelling your membership at a premium gym and finding a free way to exercise. Even leaving a more affordable gym could still save you £300 a year. Or just swap to a cheaper gym, like one of those below.  

Puregym :A nationwide, no contract gym costing from £14.99 a month, with discounts for students and a free 3-day pass

EasyGym: A nationwide gym with monthly rates under £20 and regular offers

PayAsUGym: A gym middle-man website eliminating joining fees and contracts, offering the chance to buy one-off or unlimited monthly passes

Groupon: Gym deals across the UK that give free passes and cut price deals

Savings / Year so far: £2,164.40*

*Based on switching from a gym membership that costs £65 a month to one that costs £25 a month. Check cancellation policies and  fees before cancelling.

 

Check your council tax band

Many people are overpaying for council tax because they’re in the wrong band and have been since 1991. This is because not all the government’s initial valuations were correct. By using this Money Saving Expert council tax checker it’s easy to check if you are one of the 400,000 households in England and Scotland that have been overpaying.

It only takes 10 minutes to check and challenge your valuation and you can save anywhere from £100-£400 a year. As an extra bonus, rebates are backdated for as long as you’ve been in the property, right back to 1993, so you could get a lump sum and a monthly saving.

Yearly savings so far: £2,264.40*

*Based on the lowest value of the £100-400 backdated council tax repayment

Your total yearly savings could be up to

-          £1,440.40 on smart food swaps

-          £200 on energy bills

-          £44 for turning off light bulbs and appliances

-          £480 by switching to a more affordable gym

-          £100 – £400 on your council tax valuation

So if you’re currently at a premium gym (£100 per month) and have some form of council tax valuation savings (£100 per month), then you could save over £2,250 a year.

If you do this every year and put this lump sum in a stocks and shares ISA paying 4.4% annual interest, it would be worth over £13,000 after 5 years. A shared ownership deposit with So Resi can be as little as 5% of the value of the share of the property you buy, so £13,500 could cover your deposit and other costs. Read more about the costs of shared ownership.

 How to save money renting

There are lots of ways to help you get into the saving habit and start putting away money you may not even miss. Apps such as Moneybox automate your savings by rounding up change to the nearest pound every time you buy something. The company is FSCS regulated and your investments will be protected up to £50,000.

The Chip App uses your own spending habits (and an algorithm) to work out exactly what you can and can’t afford to save every month. The account pays a standard interest of around 1% AER and an extra 1% AER for every friend you introduce (up to a maximum of five). If you go into an overdraft it will replace the cash immediately, pay the bank charges and give you a £10 savings boost.

 

Buy and sell your home goods

Homelet’s recent report in May 2018 says the average cost of renting a house in the South East works out at £1008 a month. In the UK generally it’s £919 London stands at £1586 at the time of writing.

This doesn’t leave you much to spend on making your place homely, so use the power of internet communities to help you cut costs. Apps such as Freecycle offer unwanted furniture, homewares and other goods to help you furnish your home on a budget.

Shpock – ‘the boot sale app’ – makes it cheap and easy to make money by selling your unwanted goods. According to a 2016 study of 2,000 British consumers by insurance company Aviva, the average home contains redundant tech items worth £1,414.

 

Selling stuff could help you free up more money for a deposit, while getting rid of some of the 143 unwanted items that this Oxfam study claims are cluttering up the average household. Free up enough space and you could even downsize the property you’re renting and save more for a deposit.

 

Become a property guardian

In return for ‘babysitting’ an empty property, you can live at a vastly subsidised rate. According to this report by Moneywise, property guardians can pay half the market rate for rent. Stay in a vacant property while the building awaits planning permission, and your rent will be heavily subsidised by the building owner.

Property Guardian agency Camelot says 47% of its tenants are between the ages of 26 and 35, with 42% between 36 and 65. If you want to be a property guardian, here are a few things you’ll need to know:

  • You must be employed
  • Guardians have fewer rights than tenants. You may only have a 2-week notice period, so you need to be flexible
  • Buildings are often waiting for planning permission
  • Accommodation tends to be basic and unfurnished

Saving up for a deposit has never been more challenging, but shared ownership can help you get on the ladder. Say you want to buy 40% of a shared ownership property that has a full price valuation of £500,000. Your share would be worth £200,000 and the breakdown of fees could be:

  • As little as a 5% deposit on your £200,000 share (£10,000)
  • Solicitors fees (around £1000, plus disbursements, which pay for things like local searches)
  • Independent financial advisor fees (£400-600)
  • Reservation fee (£250)
  • Stamp duty – which may not apply

So your overall costs for moving into a £500,000 shared ownership home could be as little as £11,650 (plus stamp duty if applicable). Find out more about shared ownership costs here.

If you’re interested in owning a home, find out more about how to buy a shared ownership property with So Resi here.

Important: Thames Valley Housing is not a financial advisor and this article does not constitute financial advice. All financial decisions should be carefully considered and you should seek the help of a qualified, independent professional where necessary.

Any mention of specific brands, retailers or banks should not be taken as an endorsement of said entity and does not constitute any form of partnership with said entities.

NB. All figures, interest rates and offers valid at the time of publishing.

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