So what’s the best way to save for a mortgage?
A lot will depend on your own circumstances. If you’re paying rent, you might feel you need access to your savings just in case. If you’re lucky enough to still live at home and be able to save a chunk of money each month without the need to access it, you might want to look at accounts where you lock your money away.
Help to Buy ISAs – these are only available to first time buyers. The difference between this and a standard ISA, is that for every £200 you put in, the government will pay you a £50 tax free ‘bonus’ to go towards the property you buy. You can only put in £200 a month but in the first month you are allowed to deposit a further £1,000.
You’ll get the government bonus when you buy a property, if you decide not to buy one you won’t get the extra money. The bonus part of a help to buy ISA is paid per person, so if you’re planning on buying a home with someone else and you’re both first time buyers, you’ll get double the money. You can open a Help to Buy ISA until December 2019.
The maximum bonus from the government is £3,000 and the minimum you have to have saved to be able to qualify for a bonus is £1,600 (generating a bonus of £400).
Savings accounts – there are various savings accounts on the market, so you’ll need to think about what suits your needs best. The accounts that have the highest interest rates are usually fixed rate savings accounts where you lock your money away for a set period of time – typically for a year or more. Why not find out more about fixed rate accounts and decide if it’s right for you?
If you don’t think you can put your money away for that length of time without access, then there are instant access savings accounts. The drawback is that the rates of interest won’t be as high, but you do have the freedom to get hold of your money if you need to. Find out more about instant access accounts and what they have to offer.
Current accounts – most of us will have a current account for our day-to-day needs. There is of course, nothing to stop you using this as your method of saving. If this is the only account you have, at least you’ll always know exactly what you’ve got coming in and going out and you won’t have to remember any other accounts you have. The biggest disadvantage is that it could be tempting to simply spend whatever you’ve saved on an impromptu holiday or cheering yourself up with a new wardrobe.