Saving for a house deposit in the UK is a long game. But there's a government scheme that adds 25% to your savings every year — and most first-time buyers either don't know about it or aren't using it optimally.
How much deposit do you actually need?
The minimum for most lenders is 5% of the purchase price. But 5% comes with significant disadvantages:
- Higher-risk mortgage products with higher rates
- Higher monthly repayments
- Less equity buffer if prices fall
- Mortgage insurance (some lenders require it at high LTVs)
The sweet spots are 10% (materially better rates) and 20% (access to the best deals on the market). For most first-time buyers, 10% is the realistic target.
Required deposits on common property values:
- £200,000 home: 5% = £10,000 | 10% = £20,000 | 20% = £40,000
- £300,000 home: 5% = £15,000 | 10% = £30,000 | 20% = £60,000
- £450,000 home: 5% = £22,500 | 10% = £45,000 | 20% = £90,000
Don't forget to budget for additional costs: stamp duty (if applicable — first-time buyers are exempt on homes up to £425,000 until March 2025, then £300,000), solicitor fees (£1,500–£3,000), survey (£400–£1,500), and mortgage arrangement fees (£0–£2,000).
The Lifetime ISA: the most underused first-time buyer tool
The Lifetime ISA (LISA) pays a 25% government bonus on everything you save, up to £4,000/year. That's up to £1,000 of free money every tax year.
Key rules:
- Must be between 18–39 years old to open
- Can save up to £4,000/year (£333/month)
- 25% bonus paid monthly by HMRC
- Must have had it open for 12 months before using for a property purchase
- Property must cost £450,000 or less
- Must be a first-time buyer
- Withdrawing for any other reason (before age 60) incurs a 25% penalty on the whole pot
Example of the LISA in action: You save £333/month (£4,000/year). The government adds £1,000. After 4 years: you've contributed £16,000, received £4,000 in bonuses, plus interest on the full pot. On a 4.5% AER LISA, the total after 4 years is approximately £22,500 — vs £18,000 without the LISA bonus.
Best accounts for deposit savings
1. Lifetime ISA — best by far for eligible first-time buyers. The 25% bonus effectively gives you a guaranteed 25% return on top of whatever interest rate the account pays. Skipton and Moneybox offer LISA products.
2. High-interest easy-access savings accounts — currently paying 4.5–5% AER (April 2026). Good for the portion of savings above the £4,000 LISA limit, or if you're not LISA-eligible. Chase, Chip, and Marcus consistently offer competitive rates.
3. Fixed-rate bonds — 1–2 year fixes currently offer 5–5.5% AER. Suitable if you're confident you won't need the money for the fixed period. Don't lock away emergency funds.
Do not invest your deposit in stocks. If you need the money in under 5 years, stock market volatility can destroy your deposit in a downturn. Cash savings only.
How to build your savings plan
A realistic framework for a 10% deposit on a £280,000 property (£28,000 target):
- Max out LISA: £333/month → £4,000/year savings + £1,000 bonus = £5,000/year toward deposit
- Additional easy-access savings: £400/month → £4,800/year
- Total annual saving: £9,800
- Time to reach £28,000 (with 4.5% AER): approximately 2.7 years
The LISA bonus shaves 6–12 months off most deposit timelines. Open one as early as possible — the 12-month lock-in clock starts the day you open the account, not when you start depositing seriously.
One thing most people get wrong
People wait until they have a large lump sum before opening a LISA. The 12-month rule means the clock starts on opening day. Open the LISA now with £1. Put it somewhere you won't touch it. The 12 months start running immediately.
Frequently asked questions
How much deposit do I need to buy a house in the UK?
The minimum deposit for a residential mortgage in the UK is typically 5% of the purchase price, though 10% unlocks significantly better rates and 20%+ gives you access to the best deals. On a £250,000 home: 5% = £12,500, 10% = £25,000, 20% = £50,000. First-time buyers can use the Lifetime ISA (LISA) — the government adds a 25% bonus on savings up to £4,000/year, worth up to £1,000/year free money toward your deposit.
How long does it take to save for a house deposit?
At the UK median salary of £37,000 (£2,450/month take-home), saving 20% of income (£490/month) into a 4.5% AER savings account, it takes approximately: 3 years to save a 5% deposit on a £200,000 home (£10,000). 5 years for a 10% deposit. 10 years for a 20% deposit. A Lifetime ISA accelerates this significantly — £333/month into a LISA = £4,000/year + £1,000 government bonus = £5,000/year toward a deposit.
What is a Lifetime ISA (LISA) and should I use one for a house?
A Lifetime ISA lets you save up to £4,000/year and the government adds a 25% bonus (up to £1,000/year). The total pot (your savings + bonus) can be used to buy your first home, provided the property costs £450,000 or less and you're a first-time buyer. You must have had the LISA open for at least 12 months before using it. The penalty for withdrawing for any other reason (other than age 60+ or terminal illness) is 25% — which effectively claws back the bonus and a small part of your own savings.
What is a Help to Buy ISA vs Lifetime ISA?
Help to Buy ISAs closed to new applicants in November 2019 and existing holders can claim the bonus until 2030. If you already have one, you can save up to £200/month with a 25% government bonus on the closing balance (max £3,000 bonus on £12,000 savings). You cannot open a new Help to Buy ISA. New first-time buyers should use a Lifetime ISA instead, which has a higher annual limit (£4,000 vs £2,400) and higher maximum bonus (£33,000 lifetime vs £3,000).
Where should I keep my house deposit savings?
The best options in order of return: 1) Lifetime ISA (if first-time buyer) — 4.5%+ AER plus 25% government bonus makes this the best return available by far. 2) High-interest easy-access savings accounts — currently paying 4.5–5% AER. 3) Fixed-rate savings bonds — slightly higher rates (5–5.5%) but money is locked for 1–2 years. 4) Cash ISA — same rates as easy-access but tax-free (relevant if you'd otherwise breach the Personal Savings Allowance). Keep deposit savings in cash — don't invest in stocks as the timeline is too short and a market crash just before you buy is devastating.