How to increase your chances of getting on the property ladder

Data from Halifax has revealed that the average deposit needed to get on the housing ladder fell by 15% last year. This was down to plummeting house prices, which were knocked down by sky-high mortgage rates and cost of living pressures.

The combination of lower deposits and a fall in house prices will leave many first-time buyers keen to get on the ladder before prices rise. With this in mind, here are some top tips on how to build up your deposit pot sooner rather than later.

Open a Lifetime ISA, if you haven’t got one yet

A lifetime ISA is a savings account that you can use to save for your first home. The government will provide you with a 25% bonus on what you put in every year, at a maximum of £4,000 per year. This means, if you put the max of £4k in, you’ll get a £1k bonus.

However, you must have money in your lifetime ISA for at least 12 months before you buy a property. If you’re a year or more off buying your first home, it could be worth opening one to take advantage of what is, essentially, free cash.

But if you suspect you might be ready to buy sooner, you’re better off leaving your deposit outside of a lifetime ISA.

Automate your deposit savings

Life is busy, which means transferring money into your savings account isn’t always at the top of the to-do list. Setting up a standing order from your current to your dedicated deposit savings account (or Lifetime ISA, if you have one) is a great way to automate the process.

Scheduling this money to go out immediately after you get paid is a good idea. This means you’ll make adding to your deposit pot a priority over your non-essential spending, rather than just saving whatever happens to be left in your account at the end of each month.

Try the 50-30-20 rule

How much you can save towards your deposit is highly personal and depends on your individual income, outgoings and circumstances, such as whether you have debts. But if you’re looking for a bit of guidance, a good financial rule to follow is the 50-30-20 rule of dividing your income:

• 50% for needs: Your essential expenses and things you can’t do without, such as rent, food shopping, transport and bills.
• 30% for wants: Things that bring you joy, such as going out for food, socialising, trips away, hobbies and clothes shopping.
• 20% for savings: Money that gets paid directly into your savings account.

However, if you’re really looking to accelerate the time needed to save for a deposit, consider adjusting the percentages to suit. For example, you might choose to put 30% towards savings and leave only 20% for wants, temporarily, to speed up the process.

Saving does need to be sustainable, so have flexibility with yourself. For example, in January, you might be able to put 30 or 35% towards savings, as it’s generally a quieter month. But in June or July, if you’re going away, this might need to switch to 15 or 20%.

Reduce the cost of your rent, if you can

While cutting back on your rental costs isn’t the easiest of options, it’s definitely doable – especially if you’re keen to get on the ladder quickly.

If you currently rent your own property, for example, could you consider getting a housemate, or moving into a house share temporarily? According to data by Home.co.uk, the average rent for a flat in London is £4,365 per month, while the average rent for a room is just £1,087. This means you could amass significant savings by sharing – even if only for a few months – while you build up your deposit.

Another option is moving back in with your parents. This won’t be possible (or doable) for everyone, but if it’s something you can make work, the savings could be huge. Of course, you could still agree to pay them an amount of rent to cover bills and expenses.

Cut your bills where possible

Setting aside some time to go through your broadband, insurance and phone bills could cut a decent chunk of money off your monthly outgoings, which can instantly be put in your deposit pot.

Use comparison sites to see if you could reduce your monthly or annual outgoings for broadband, TV and mobile services, as well as insurance payments, especially if you’re out of contract or it’s due for renewal.

If your phone contract is due to end this year, consider keeping your phone and opting for a cheaper, SIM-only plan. This alone could save you hundreds.

Look at your subscriptions. Netflix, Spotify, Apple TV and Amazon Prime might seem like nothing individually, but can easily add a significant chunk to your monthly outgoings altogether. Are there any you could live without?

Energy bills are predicted to fall this year but are still at a historical high, so the best way to save is to be savvy about your usage. Try to only heat the rooms you use, programme your heating to avoid wastage and consider turning down the flow temperature of your boiler. It’s also worth keeping an eye out for cheaper fixed-rate deals.

Review your non-essential spending

Reviewing your non-essential spending is an instant way to save money that can be used towards your deposit.

Sit down, open your banking app and write down what you’ve spent (aside from bills) in the previous month and why. You could split these into categories, such as eating out, takeaways, gifts for friends/family and clothes shopping.

Once you’ve got the figures in front of you, it should be easy to see where you might be able to cut back. This way, you can adjust your spending and direct money towards your deposit fund instead.

Consider a side hustle

The cost of living crisis has impacted all of us, making it much harder to save. For this reason, earning money to supplement your income is never a bad idea, but it can be especially useful if you're aiming to get on the property ladder as soon as possible.

You could look at your side hustle as a direct means to save – i.e, anything you earn from it, whether that's £20 or £200, goes directly into your deposit fund. What you choose to do as a side hustle will depend on your unique skills and circumstances.

For example, if you’re a good writer, you could try out freelance blog writing via sites like PeoplePerHour. If you’ve grown up with younger siblings and feel confident looking after children, you could start babysitting a couple of nights per week. If you’re an animal lover, you could offer dog walking services. Or if you’re a maths graduate, you could start tutoring GCSE or A-Level students.

But there are even easier options. You could declutter your home and start selling your unwanted items. From clothes to tech, this can add up to a decent sum. Or, you could take online surveys for money via sites like YouGov and SwagBucks, which can literally be completed whilst watching TV in the evenings. It can be useful to set up a separate email for these sites, so that your everyday inbox doesn’t overflow with survey offers.

Be aware that if you make more than £1,000 from side hustle earnings, you’ll need to declare your earnings to HMRC through self-assessment.