First time buyers need a plan
Wednesday, July 24, 2013
In March 2013, the average UK house price stood at £235,000, a year to date increase of 2.7%*. Most first time buyers looking to get a 90% 'loan to value mortgage' will need a deposit of 10% of the property's value and, with house prices continuing to rise, this meant that in January 2013 the average deposit reached £26,468. With real-wages at an all-time low and predictions for inflation to increase, it is now being suggested that it takes first time buyers anywhere between 10-13 years to save to buy their first home.
The added responsibility of owning a home brings with it extra costs. As well as saving for their deposit, first time buyers should also build up a rainy day fund to help pay for any unexpected costs such as repairs, and the more regular financial commitments owning a home brings such as council tax and utility bills. As a result, first-time buyers will have to save above and beyond the required amount for a deposit. It is, therefore, important to have a savings strategy that fits your needs whilst maximising the money you put in.
The Foresters Tax Exempt Savings Plan (TESP) provides a tax-free way of saving towards mid to long-term goals and can be held in addition to an ISA. Tax Exempt Savings Plans are only offered by friendly societies and provide savers with an extra £300pa of tax-free savings.
- Guaranteed return - a guarantee to get back at least what has been paid into the plan, providing contributions are maintained for the full term of the plan;
- Tax-free cash lump sum - on maturity, under current HMRC guidelines, the policyholder will receive a cash payout free of Capital Gains and Income Tax;
- The option to save £25 per month with a choice of how long for a minimum of 10 years up to a maximum of 25 years;
- Potential for growth - with the addition of annual bonuses and a final bonus (bonuses are not guaranteed).
Neil Armitage, Marketing Director at Foresters said: "The Foresters TESP is designed to be held for the long-term and is therefore an ideal vehicle, alongside other savings initiatives such as ISAs, to help first time buyers to save for their deposit. The plan can be tailored to fit the specific needs of an individual while the unique additional tax advantages ensure money is saved efficiently. What's more, by putting away a fixed amount each month over a period of time, savers can demonstrate that they can manage their finances correctly, a vital component in securing their first mortgage."
Please remember that inflation will reduce the spending power of the money you get back in the future.
*Office for National Statistics, House Price Index, March 2013