November 22, 2022
When looking to buy a property there are a lot of practical considerations, especially on the financial side. Not only is there the stamp duty the legal fees and the moving fees there is also the deposit to think of and this is perhaps one of the biggest challenges. The question that everyone has is “how much deposit do I need to save?” Sadly, there is no one size fits all answer so in this guide we will take a look at average regional house prices and what that means in terms of a possible deposit, but also at some of the considerations that need to be taken into account when looking at how much to save.
What can you afford?
Perhaps the first thing to look at is how much can you afford to pay each month on your mortgage and what type of property do you want? You need to match these together. If the mortgage repayments over the term you require are more than you can afford, a larger deposit might help bridge the difference. It can be advisable to work with an independent financial advisor to work through different scenarios and see what makes most sense for you and your circumstances.
What are your timelines?
This is another take on “what can you afford”, but when do you want to buy and how much can you afford to save each month? You might need to alter your timings but this will make a difference to how much you can physically save in the time you have given yourself.
Mortgage market
Banks typically require at least a 10% deposit, but with the Government’s 95% mortgage scheme, there are lenders who will accept a 5% deposit. Despite this, the more you have as a deposit, the better the mortgage deals you can obtain in terms of interest rate. So, it is worth considering deposits of 15% to 25%. Bear in mind that deposits go up in 5s so saving a 17% deposit isn’t worth it. In addition to this, the larger the deposit you have, the more likely a lender is to accept you for a mortgage due to the lower risk of the property going into negative equity.
So how much?
Although there is no one answer, if we take a look at the average regional property prices as stated by the Office for National Statistics for June 2022:
| Deposit Amount % | ||||||
| Region | Average Price | 5% | 10% | 15% | 20% | 25% |
| East Midlands | £245,911 | £12,295.55 | £24,591.10 | £36,886.65 | £49,182.20 | £61,477.75 |
| East of England | £354,481 | £17,724.05 | £35,448.10 | £53,172.15 | £70,896.20 | £88,620.25 |
| London | £537,920 | £26,896.00 | £53,792.00 | £80,688.00 | £107,584.00 | £134,480.00 |
| North East | £157,924 | £7,896.20 | £15,792.40 | £23,688.60 | £31,584.80 | £39,481.00 |
| North West | £212,347 | £10,617.35 | £21,234.70 | £31,852.05 | £42,469.40 | £53,086.75 |
| South East | £390,513 | £19,525.65 | £39,051.30 | £58,576.95 | £78,102.60 | £97,628.25 |
| South West | £322,329 | £16,116.45 | £32,232.90 | £48,349.35 | £64,465.80 | £80,582.25 |
| West Midlands | £246,114 | £12,305.70 | £24,611.40 | £36,917.10 | £49,222.80 | £61,528.50 |
| Yorkshire and the Humber | £203,973 | £10,198.65 | £20,397.30 | £30,595.95 | £40,794.60 | £50,993.25 |
The range of deposits that are needed is pretty large, with the smallest being around £8,000 to the largest being over £130,000.
Ultimately the size of deposit will come down to what you can afford to save, what you can afford to pay each month on your mortgage, the property you want to buy and the region you are in. We would advise working with an independent financial advisor or mortgage broker to look at your finances and the mortgage offerings on the market to see what deposit makes sense for you.
N.B Your home may be repossessed if you do not keep up repayments on your mortgage. There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.