How to Save a House Deposit in the UK

The minimum deposit for a standard UK residential mortgage is 5%. However, the rates available at 5% LTV are typically 0.5–1.5% higher than at 10%, and significantly higher than at 15%.

For a £250,000 mortgage, the difference between a 5% and 15% LTV rate is roughly £150/month — meaningful over a 25-year term.

For most first-time buyers, targeting a 10% deposit is a practical balance between achievability and rate benefits. Saving to 15–20% is optimal where possible but shouldn't delay purchase indefinitely in rising markets.

The LISA is the most powerful savings vehicle for UK first-time buyers:

— Open to UK residents aged 18–39 — Contribute up to £4,000/year — Government adds a 25% bonus (up to £1,000/year) — Must be used for first home purchase (£450,000 or under) or retirement — Must hold for at least 12 months before using for a purchase

On £4,000/year for 4 years, you receive £4,000 in government bonuses. Combined with interest on the growing balance, a LISA dramatically accelerates deposit saving.

Warning: the LISA penalty (25% on other withdrawals) effectively claws back the bonus plus more. Don't open a LISA if you may need funds for other purposes.

Cash LISA: Fixed or variable interest (currently 3.5–4.5%). Low risk, guaranteed return. Best for buyers saving for 1–3 years.

Stocks and Shares LISA: Invests in equity funds. Higher potential returns over longer periods but subject to market risk. More appropriate for buyers with 5+ year timelines.

Beyond the LISA, a standard Cash ISA (up to £20,000/year) at currently competitive rates (4.5–5%+) should hold any savings above the LISA limit.

Set a specific monthly target: If you need £30,000 in 4 years, divide by 48 months = £625/month, minus LISA bonus = effectively ~£520/month of direct saving required.

Automate savings on payday: Set up a standing order to your LISA and ISA on salary day. Money you never see isn't missed.

Family gifts: There is no inheritance tax implication on gifts given more than 7 years before death. Many first-time buyers receive deposit contributions from parents — this is legitimate and widely used.

Shared ownership: Allows purchasing a share of a property (typically 25–75%), requiring a much smaller deposit. Though shared ownership has its own complexity, it can provide a route to homeownership with less saved.