A recent analysis by financial app Plum, shared with the Mirror, revealed that the average time needed to save for a first-time house deposit has been disclosed. For an individual earning £30,000 annually, it would take approximately 11 years and four months to accumulate the current average deposit amount of £68,154, following the 50/30/20 budgeting rule.
Under the same savings guideline, a person with a £25,000 salary would require 12 years and eight months to reach the £68,154 milestone, while someone earning £50,000 annually could achieve it in eight years and two months.
To expedite savings, Plum suggests utilizing a Lifetime ISA (LISA), which offers a 25% government bonus up to £1,000 yearly when saving the maximum £4,000 per year. With a LISA, the saving duration for a £30,000 earner could be reduced to nine years and eight months, and for those earning £25,000 or £50,000 annually, the time frame could be shortened to ten years and seven months or seven years and three months, respectively.
However, a LISA has limitations as it can only be used for first home purchases or retirement. Attempting to withdraw funds for other purposes incurs a 25% penalty. Additionally, the property’s value cannot exceed £450,000, potentially excluding London buyers.
Rajan Lakhani, a personal finance expert at Plum, highlighted the challenges of saving for a deposit amidst rising house prices and living costs. He emphasized the significant impact of a LISA in reducing the saving timeline, especially without parental assistance.
Lakhani also noted that salary increases over time could positively influence savings efforts, and advised diversifying savings beyond the LISA contribution limit. Moreover, deposit requirements vary by region and lender, with some offering lower deposit options for specific professions like teaching or healthcare.