Money Saving Explore The Best Mortgage Savings Account To Use When Saving For A House With LDV

In this blog we will discuss the following:

• What Is Going On In The Property Market Today?
• Different Types Of Mortgage Savings Account And Their Rates
• Ways In Which You Can Start Saving For A House
• Saving For A Mortgage Dos And Don’ts

What Is Going On In The Property Market Today?

The average property price in the UK has dropped more than 2% of what it was in 2022. This has not been a shocker for investors as prices have been dropping since the beginning of the year. Some investors seem to project that furthermore price drops are to be expected for the rest of 2023. This is not all bad news because for all those who want to start investing in property, now would be the perfect time to start.

Due to the economic state, some houses are taking longer to sell. This is true for homes selling for £1 million or above. Some homes are selling below the asking price. On average, sellers often have to accept offers that are 3.8% lower than the original asking price, and more sellers get more discounts.

What does this mean for you as a first-time buyer? Is there any way you can save when buying a house? Let’s dive into it.

Different Types Of Mortgage Savings Account And Their Rates

1. Fixed Term Bonds

If you looking to save money for a set amount of time and want the certainty of a fixed interest rate, then the fixed-rate bond could be right for you.

1 Year Fixed Rate Bond

Fixed rate for 1 year - annual

• £10 000+ deposit = 5.50% Gross and 5.50% Gross AER (Annual Equivalent Rate)
• £1,000+ deposit = 5.30% Gross and 5.30% Gross AER (Annual Equivalent Rate)

Fixed rate for 1 year - monthly

• £10 000+ deposit = 5.37% Gross and 5.50% Gross AER (Annual Equivalent Rate)
• £5,000+ deposit = 5.18% Gross and 5.30% Gross AER (Annual Equivalent Rate)

No withdrawals are permitted during the fixed term only when the term has matured.

2-Year Fixed Rate Bond

2-Year Fixed Rate - Annually

• £10 000+ deposit = 5.40% Gross and 5.40% Gross AER (Annual Equivalent Rate)
• £1,000+ deposit = 5.20% Gross and 5.20% Gross AER ( Annual Equivalent Rate)

2-year Fixed Rate - Monthly

• £10 000+ deposit = 5.27% Gross and 5.40% Gross AER (Annual Equivalent Rate)
• £5,000+ deposit = 5.08% Gross and 5.20% Gross AER (Annual Equivalent Rate)

Interest is calculated daily and added annually to the account on the 30th of September.

2. Tax-Free Cash ISA’s

3-Year Fixed Rate Cash ISA

• £1,000+ deposit = 4.80% Tax-free AER (Annual Equivalent Rate)
• Estimated balance after 3 years with a £1,000 deposit = £1,151.02

Using any of these accounts can help in getting ready for your lifetime investment of buying a house. ‘When you decide to buy property, just remember to work out how much can you afford and how much you will need to save up to get a good interest rate.’ - Property explorer, Nontozakhe Raps.

To get more information on Cash ISA Rates, check out our Cash ISA Rates Nationwide: Saving Rates Today blog and start exploring.

Ways In Which You Can Start Saving For A House

As a first-time home buyer, you will need to put down a 20% deposit so you can be comfortable with the repayments. So if your home is worth £250,000, this means you will need to come up with a £50,000 deposit from your savings.

Raising that kind of money with proper planning may be a challenge. However, here at Love Discount Vouchers, we always got your back. Use our useful tips to see how you can save successfully for your home.

• First things first, you need to choose a location that you like. This will help you determine the price range in that area and how much deposit you need to save.
• There are a variety of websites that you can use for calculating your mortgage cost. One that we trust the most here at LDV is Nationwide. Use their online calculator to see what you can afford.
• Do research on government schemes that can help first-time buyers get their dream home. Opening a Lifetime ISA (LISA) if you’re a first-time buyer under 40 could give you a 25% boost on your savings. For example, if you put £1,000 into your Lifetime ISA, the government will add an extra £250.
• Get the right mortgage interest rate. This is the challenging part. You will need to dive deep into research to see which banks offer the best interest rates on your mortgage bond. Check out price comparison sites like MoneySupermarket to find the best interest rate.

Finding the best mortgage rate against your bond is very crucial. Here’s some valid advice you can take to heart: ‘Mortgages are secured on your home. You could lose your home if you do not keep up payments on your mortgage.’ - Nationwide. So, it is important to choose the right mortgage bond, or simply save up a good amount of deposit to lower your overall interest rate.

Saving For A Mortgage Dos And Don’ts

Saving for a mortgage deposit can take some time, which is why you need to be smart and not naive about things. So if you are thinking of saving for a house, start now! Don’t put it off for later because that will delay things.

Below are a few Dos and Don’ts that we have put together to see if you are on track:

Top 5 Dos When Saving For A Mortgage

1. Set a budget - this will help you to be accountable for what you spend.
2. Reduce your outings - Ensure that whatever goes off your debit card is needed. If memberships are coming to an end, instead of renewing, analyse and see if you can do without. Even with insurance, opt for the best but if there are cheaper options, opt for those.
3. Have a separate mortgage savings account - This will help you not to be tempted to use the funds when you need something.
4. Set a savings timeline for yourself - Be realistic with this. You know your spending habits and how strict you need to be. Set a timeline that will not put you under pressure but also give you enough time to save up a good decent deposit for your house.
5. You can set up a standing order - This will help your savings to automatically to go straight to your savings account.

Top 5 Don’ts When Saving For A Mortgage

1. Avoid late payments - Whether it’s on your revolving loan or credit card, missing payments reflects badly on your credit.
2. Take care of your credit history - This starts way before even considering taking out a mortgage bond. Most building societies and banks will dive into your credit history to see if you have any outstanding loans or too many credit cards revolving. This will be regarded as a red flag and could have an impact on the outcome of your mortgage bond.
3. DO NOT TAKE A LOAN OUT TO COVER YOUR DEPOSIT!!!! This is very important! This undoubtedly categorises you as a high risk. Just think about this: Who would want to loan someone thousands of pounds who can’t even put down a 5% deposit?
4. Don’t forget to account for other costs and mortgage protection. This can catch you off-guard if you don’t cater for it into your savings. Budget a little extra for those final costs such as mortgage protection, stamp duty, solicitors’ fees and site surveys.
5. Don’t apply for a mortgage if you were on the Pandemic Unemployment Payment (PUP) because you will not be considered for a mortgage.

Taking into account these tips will help you save for a mortgage successfully and efficiently.

Don’t Delay, Start Today!

It’s no secret that saving for a house is considered the biggest challenge one can embark on. With the cost-of-living crisis currently in the UK and the world, saving for a mortgage is more difficult now than ever before! But not all is lost, although it can take a bit longer than usual, but it’s possible. With our mortgage savings account guide and tips and tricks on how to save for a deposit, you can own property in no time.

Don’t delay, start saving today. To see more best mortgage interest rates for buying a house, check out HSBC to see how much you can qualify for as a first-time buyer or a remortgager.