Set your deposit target (typically 5-10% of the property price plus £3,000-£8,000 in buying costs), open a Lifetime ISA immediately if you're a first-time buyer under 40 (the government adds 25% on up to £4,000/year — worth up to £1,000 in free money annually), keep deposit savings in a competitive easy-access or fixed savings account, and automate monthly contributions. A couple can each hold a Lifetime ISA, potentially earning up to £2,000 in annual government bonuses combined. The 12-month clock on a LISA starts from account opening, not from when you start saving seriously.
Saving for a house deposit is the largest short-to-medium-term financial goal most people will have. It's also more achievable than it feels if you approach it with the right structure — particularly the Lifetime ISA, which provides government money that no other savings vehicle can match.
Step One: Calculate Your Target
The minimum deposit for most mortgage products is 5% of the purchase price. But 10% provides meaningfully better mortgage rates and should be the target wherever achievable. On top of the deposit, budget separately for buying costs:
- Stamp Duty Land Tax (often £0 for first-time buyers on properties to £300,000, then 5% on the £300,001-£500,000 portion)
- Solicitor/conveyancing fees: £1,500-£2,500
- Survey: £400-£1,000
- Mortgage arrangement fee: £0-£1,099
- Total buying costs beyond deposit: typically £2,000-£6,000
On a £280,000 property (close to the average first-time buyer purchase): a 5% deposit is £14,000; a 10% deposit is £28,000. Add £3,000-£5,000 for buying costs. Total savings target for a 10% deposit purchase: approximately £31,000-£33,000.
The Lifetime ISA: Start Today Even If You Can't Save Much
The Lifetime ISA (LISA) is the most powerful tool available for first-time buyers aged 18-39. The government adds a 25% bonus on contributions of up to £4,000 per year — meaning up to £1,000 in free money each year.
The critical point: the account must be open for at least 12 months before the funds can be used toward a property purchase. The clock starts from account opening, not from when you start saving seriously. Opening a LISA today with even £1 starts the 12-month qualifying clock immediately.
Conditions for using LISA funds to buy:
- First-time buyer only (never previously owned a residential property anywhere)
- Property must cost £450,000 or less
- Must be buying with a mortgage (not cash purchase)
- Account must have been open for at least 12 months
Couples who are both first-time buyers can each hold their own LISA, with each earning up to £1,000 in annual government bonuses. Over five years of maximum contributions, a couple could receive up to £10,000 in government bonuses.
The withdrawal penalty for non-qualifying withdrawals is 25% of the total amount including bonus — meaning you'd receive less than you put in. Open a LISA only if you're genuinely committed to the first-home or retirement purpose.
Our comprehensive first-time buyer guide covers the full purchase process alongside deposit saving strategies.
Savings Accounts for the Deposit Beyond the LISA
The LISA is capped at £4,000 per year. For savings beyond that:
- Easy-access Cash ISA (if timeline is uncertain): current best rates around 4.4-4.5% AER, tax-free
- Fixed-rate Cash ISA (if you know your timeline within 1-2 years): best 1-year fixed around 4.68% AER
- Competitive easy-access savings account: good if you've already used ISA allowance, though interest above PSA is taxable
Making Progress: Practical Tactics
- Automate on payday — a standing order to your LISA and savings account executed the day salary arrives
- Direct windfalls (tax refunds, bonuses, gifts) straight to the deposit fund
- Review the target each year as your property search becomes more defined
- Open the LISA today — even with a minimal initial deposit — to start the qualifying clock
Frequently Asked Questions
Can I use gifted money as my deposit?
Yes — gifted deposits from family are widely accepted. Your lender will require a signed gift letter confirming the money is not a loan and that no repayment is required. Your solicitor will need to verify the source of the funds.
What happens if I exceed the £450,000 LISA property price limit?
You cannot use the LISA funds for a purchase above £450,000. You'd need to withdraw the money, incurring the 25% penalty. If there's any chance you'll buy above £450,000, consider this risk before committing large sums to a LISA.
For LISA providers and current rates, MoneyHelper's Lifetime ISA guide is thorough and impartial.
