With rent and property prices continuing to rise, saving for a deposit and getting onto the property ladder in London is now harder than ever.
According to research from Halifax, the average cost of first time buying in the city has nearly doubled in just a decade (rising from £142.423 in 2012, to £241,025 in 2020). Paired with nervous mortgage companies that are less likely to lend to anyone without a sizeable deposit, it’s clear why finding a way into the property market can seem out of reach for many Londoner’s. However, it’s not impossible!
With some simple planning and smart saving, there are ways you can make your money work for you. So, this week we’re sharing a few realistic tips to help make saving your first deposit easy. We’ve covered everything from the best saving scheme to halving your rent costs (and we promise we’re not just going to suggest you spend less on coffee).
Spend Less on Rent
This is the big one, so we’ll start with it. Renting in London is expensive, and it probably accounts for most of your monthly spending. Reducing the amount of money you’re spending on rent will free up a huge chunk of income to put straight into your deposit savings account.
Property Guardianship is a great way to keep all the freedom and fun of living in central London, without the huge monthly bill. At Blue Door, our guardians pay around 30-40% less per month than standard market rent prices. Most of our guardians come to us looking for an easy way to cut their rent costs and start putting money away for a deposit.
Photo by Greg Willson on Unsplash
If you aren’t familiar with the scheme, guardians move into a vacant property to provide 24-hour-a-day, live in occupation and protection. The guardians help the building stay safe, looked after and valuable to the local area, and in return they pay cheaper rent and get to experience a unique way of living in the city.
All of our properties have really strong communities full of artists, working professionals and key workers, and they are never overcrowded. Making the scheme a great option for saving on rent costs while continuing to enjoy really good living standards.
Other rent saving ideas include moving into your parent’s place (or another family member), you could also consider a house share, or relocating to a cheaper area. However, not all of these options are available to everyone, and some of them (i.e. moving somewhere cheaper, or home to your parents) can be quite disruptive to your life. The options you choose will depend on your unique circumstances.
Minimise Your Outgoings
Before you skip this part, we’re not here to recycle tired advice about making your lunch at home and spending less on clothes. We know you know that already, we also recognise that sometimes you don’t want to sacrifice the little joys in life (i.e. a coffee on your way to work). So here are three often overlooked, but stupidly easy ways to minimise your outgoings quickly.
1. Change your energy provider
Potential Savings: £200/year
This is such a quick way to save a lot of money. Most energy providers will offer cheaper rates to newcomers, and some even offer cashback incentives.
2. Review your phone contract
Potential Savings: £300/year
Are you really using all those minutes? And all that data? Probably not. Review your contract regularly to make sure you’re not wasting money. If you’re out of contract and have paid off your phone, sim only deals are a really good option to save money quickly.
3. Cancel your direct debits
Potential Savings: £500/year
Loads of us have direct debits we’ve forgotten about, don’t use or don’t need e.g. apps and magazine subscriptions. Review them and cancel anything you can let go of to easily save some extra pounds. While you’re at it, look into family streaming accounts for sites like Netflix or Spotify as another quick way to save a substantial amount of money.
Make Your Savings Go Further
And finally, do some research into the best savings scheme or account for you. You’re about to put a lot of hard work into saving up the cash for your first deposit – so it’s key to find an account or ISA that will give you a helping hand.
When looking for an account you need to consider a few different factors, but how you prioritise those factors will be unique to you.
How much money you will be able to save each month?
How easy will it be to access your funds?
What interest rates are on offer?
Are there any penalties if you take out the savings?
As a general rule of thumb, accounts with higher interest rates will have lower access flexibility. For some people, the incentive of a withdrawal penalty might be a good thing, but for others, this kind of account might not be a good fit. We recommend doing your own research and finding an account that works to suit your needs and financial position.
A good place to start is the Lifetime ISA, a great option for anyone ages 18-39. With the LISA, you can save up to £4000 a year tax-free. The government will then add a further 25% a year, meaning your savings could earn you an extra, free £1000 a year to go directly into your deposit saving pot.
In Summary…
Although saving for a deposit in London is a huge challenge, it’s definitely not impossible and there are plenty of tips and tricks to make the process a little easier.
If you would like to know more about becoming a property guardian to help save some money for your deposit you can click here, or call us today to find out more about our current properties.
Plus, you can sign up for our newsletter to get weekly blog post updates and be the first to know about our new property guardianship opportunities.