Is now a good time to save money for a house?

Is now a good time to save?

At the moment, interest rates are high - which is good for savers. This means that you could earn a decent rate of interest on any funds you put into a savings account. If you want to save for a big life milestone like saving for a house, it’s always better to start sooner rather than later. On average, it takes 10 years to save for a house, so even if you can only afford to put a little away at the moment, it’s better to start the clock ticking. 

Plus, if you use a Lifetime ISA to start your house fund, you’ll get a free 25% bonus on top of your savings from the government each tax year, up to £1,000. This is as well as the interest rate your LISA provider offers you if you go with a Cash Lifetime ISA. 

At Tembo, it’s our mission to help the next generation of buyers get on the ladder sooner. That’s why with our Cash Lifetime ISA, you get our market-leading 4.3% AER (variable) interest rate*. Over 5-years, saving for a house with Tembo would increase your deposit by over £600 versus the next best available rate! Get started here.

Read our guide on Lifetime ISAs here 

You might also like: How to set and reach your savings goals

If you want to start saving for a home, here are 4 reasons to keep working towards your savings goal:

1. Progress is progress

You might not be able to put as much towards your first home fund as you did before. But, over time, any amount adds up. If you save £50 every month, that’s £600 by the end of the year (which is a whole lot more than £0).

There’s no “perfect” time to start saving for a house. Although it would be nice, there are no guarantees that house prices will go down, and savings rates will stay high while you save for a house fund. So if you wait for conditions to be “perfect” before you start saving for a home, you might never buy a place.

2. With a LISA, your savings get a boost 

With a Lifetime ISA, you can make the most of your savings thanks to the free 25% bonus from the government. For every £4 you put into your LISA, you get £1 free from the government. That means if you max out the account each tax year, you’ll get up to £1,000 in bonuses for free.

Plus, if you open a Lifetime ISA on the Tembo app you’ll benefit from our in-built features which help you boost your house fund even more. This includes being automatically entered into our cash giveaways each month, and having a personal Gift Link to share with loved ones - so they can put birthday or Christmas money to good use and top up your pot.

Read more: 12 reasons why you should use Tembo to save for a house

3. The more you put in, the less you’ll owe

Putting down a bigger house deposit means you need to borrow less from a lender for a mortgage. With a smaller mortgage loan, you’ll be able to access lower mortgage interest rates,  helping to bring your mortgage repayments. You’ll also own more of the property outright.

You might like: 6 ways to get lower mortgage interest rates

4. Boost your bidding power

If demand for houses is high when it comes round to buying your first home, you might have to offer above the listed price for a home. In most cases, the person with the highest bid will be given the opportunity to buy the property. This is what’s known in the industry as “offers over”.

The more money you can put towards your home, the more you can up your chances of outbidding the competition 💪

Learn how to negotiate house price in this guide.

Will savings rates go up in 2024?

Right now savings rates are high, but they could fall later on in 2024. This is because it’s widely expected that the Bank of England will lower its base rate in the second half of the year if inflation continues to fall. The base rate impacts what interest rates banks and building societies offer on their loan and savings products. When the base rate falls, this tends to lead to lower interest rates.

So opening a Lifetime ISA sooner rather than later will allow you to make the most of the high saving rates right now.