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How do you plan to buy your first home?

How do you plan to buy your first home?

Category: Money
Author: Leanne Macardle
Date: 22/11/2018

There's nothing better than the feeling of finally getting your foot on the housing ladder, and it seems that many would-be first-time buyers (FTBs) would go to extreme lengths to make that dream a reality. While diligently saving is of course high on the priority list, 63% plan to sell valuable items to boost their coffers, and 14% expect to raise more than half of the funds needed in this way.

Any means necessary

Scraping together a deposit is the first and arguably biggest hurdle that many FTBs face, so it's little wonder that so many would be willing to sell their valuables to reach that goal. Some have additional means in mind, however, with 62% saying that they're relying on an inheritance pay-out, while 81% expect at least some of the funds will come directly from the Bank of Mum and Dad.

Others plan to approach friends (50%) and other family members (48%) to ask for a loan, and 49% will turn to their grandparents for a cash boost. Yet nearly all (95%) will use their cash savings, and 60% will use stock market investments as well, so it seems that the vast majority have already been working hard to boost their savings pot on their own.

Find out about stocks & shares ISAs

But could they be doing more? The research, from The Nottingham Building Society, goes on to reveal that many FTBs are missing out on hefty Government bonuses by not saving in the right places.

Not-so-savvy savers

There are two key schemes that first-time buyers can currently benefit from – the Help to Buy ISA and Lifetime ISA (LISA) – both of which offer a Government bonus of 25% on everything they save. Yet despite the potential boost, 40% of respondents have no intention of using a LISA (even though they could receive bonuses of up to £1,000 a year), and 21% are similarly missing out by not taking advantage of a Help to Buy ISA.

Learn more about the Help to Buy ISA and Lifetime ISA by reading our guides

"We know saving for a deposit is no mean feat for first-time buyers, and our research echoes what we hear all the time across our branch network: people are exploring every available route to get on the ladder," said Tina Hayton-Banks, director of Member Services for The Nottingham. "[However,] it's a shame there's still a relatively low awareness of products that can help them get there faster."

Why wouldn't you want free cash from the Government? Considering the potential uplift on offer, it's surprising that so few would consider using these tax-free savings schemes, especially when you consider the rates on offer. The Help to Buy ISA in particular can offer impressive returns, with a top rate of 2.58% available – far higher than the top-paying fixed rate ISA of 2.26% – though it's worth bearing in mind that you can only save up to £200 a month in these accounts, after an initial deposit of up to £1,200. There are a few cash-based LISAs available too, though the majority continue to be stocks & shares varieties, so it's worth considering if you're comfortable with the extra level of risk for the potential of better returns.

Should you get a stocks & shares ISA or a Lifetime ISA?

Whichever option you choose, however, it makes sense to consider one of these accounts if you're saving up to buy your first home. It's important to be aware of the restrictions, but if you're focused on taking that first step, they could give your savings pot a serious boost.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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