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Habstash Blog | Helping aspiring homeowners save for their dream home

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The UK government’s Autumn Budget is always a major event, carrying particular significance for first-time buyers and home deposit savers. This year’s budget was historic - the first in over a decade from a Labour government and the first ever delivered by a female Chancellor. With rising cost-of-living and a housing crisis, the path to homeownership has never felt more daunting. Yet, with a cautious optimistic eye, we look to this budget for signs of progress - small but meaningful steps that could ease financial strain and make homeownership feel a little closer. Will these proposals bring the boost you need in getting closer to buying that dream home? Let’s dive into what’s changing and how it could impact your future.

1) Stamp duty relief: the countdown begins!

Stamp Duty Land Tax (SDLT) has been a hurdle for many individuals looking to purchase their first home. In September 2022, the Conservative government temporarily increased the nil rate of stamp duty, the amount before you have to start paying stamp duty on a purchase, raising the nil rate for first-time buyers from £300,000 to £425,000. Good news for now - the budget continues the SDLT exemption for first-time buyers purchasing homes up to £425,000, allowing them to sidestep the tax until April 2025. After that, the threshold will revert to £300,000. For homes between £425,000 and £625,000, a rate of 5% will be applied on the amount exceeding £425,000. After April 2025, first-time buyers will have to pay 5% on properties priced between £300,000 and £500,000 on the amount exceeding £300,000.

This reprieve could help those saving for a house deposit, making the cost of buying less daunting in the short term. As an example, first-time buyers purchasing a home costing £500,000 will be paying SDLT of £3,750 until April 2025. Once we enter the next financial year, SDLT rates will shoot up to £10,000. This is a huge savings of £6,250. It means there’s a bit of a ticking clock for potential buyers in high-cost areas to take advantage of the current rate before 2025. So, if you’re on the hunt for a home and you have your finances in place, this could be the perfect time to press “go” on your property search. Rightmove expects to see a rush of first-time buyers, which is likely to push up competition for a suitable property. While saving the extra pounds of stamp duty is beneficial, it is important however not to fall into the trap of making an unhappy purchase.

2) Stamp duty hike for buy-to-let homebuyers

The budget also introduced a higher SDLT rate for second homes, with the existing surcharge increasing from 3% to 5% effective 31 October 2024. With this move, the Chancellor aims to provide an advantage to both new buyers and those moving home and expects 130,000 additional transactions over the next five years.

This measure is intended to disadvantage buy-to-let (BTL) buyers who some view as crowding out property newcomers in a supply constrained housing market. First-time buyers who are saving up for their house deposit could somewhat benefit from fewer people looking to get into BTL property.

3) Lifetime ISA stays the same: a missed opportunity?

Nothing. The Lifetime ISA (LISA) remains a smart option for those under 40 saving for their first home, offering a 25% bonus on up to £4,000 in yearly savings. But with house prices soaring, the £450,000 property cap on the scheme has proven restrictive for buyers in certain geographies. The house price cap has been frozen since LISA’s inception in April 2017. On top of that, there has been a 6.25% withdrawal fine for people who buy above the £450,000 price cap. While the budget didn’t officially raise the cap, there’s been a push to reform the LISA and either raise the cap or remove penalties for buyers needing to exceed it.

If reforms like raising the cap or waiving penalties were introduced, the LISA could truly shine, giving buyers more flexibility to use their savings even in pricier markets. It would give first-time buyers more freedom to shop in areas that might currently feel out of reach. We hope that with mounting calls for reform, the government will step up and address these changes - giving more people the confidence to save into a scheme that is exclusively geared toward homeownership.

4) Inheritance tax: a new era for family wealth?

Inheritance tax (IHT) thresholds are staying frozen for another two years at £325,000 until 2030. Rising wealth including house price inflation means more estates are likely to pay inheritance tax. But the big news here is about pensions. Currently, assets subject to IHT include property, savings, investments, personal items; pensions are excluded. This has led to the well-off to preserve and resist pension withdrawals and instead deplete other savings first and thereby reduce eventual IHT liability.

In an effort to close such loopholes, from April 2027, inherited pensions will be included in a deceased estate and subject to the 40% rate of tax on anything over the £325,000 threshold (£500,000 if the estate includes a property). This is a major shift from the previous tax-free inheritance status and will likely affect anyone planning on relying on inherited pensions as part of their estate planning or future homeownership funds.

Also, starting in April 2026, the first £1 million of combined business and agricultural assets will continue to attract no inheritance tax at all. But for assets exceeding this £1 million threshold, inheritance tax will apply with a 50% relief, at an effective tax rate of 20%.

The proportion of first-time buyers receiving help from the Bank of Mum and Dad to secure their home deposits in 2023 was 57%, up 10 percentage points on the previous year. The freeze on the IHT nil-rate band, the plan to tax inherited pensions and changes to agricultural and business property relief could accelerate how much and how quickly older parents decide to gift to their children, not least for contributing towards the children’s house deposit.

5) Boosting affordable housing for first-time buyers

The Affordable Homes Programme has been pivotal in providing lower-cost housing to eligible buyers, including many first-time buyers. Now, with a fresh £500 million injection aimed at building 5,000 new affordable social homes, the government is doubling down on making affordable housing a reality for more people. This funding is part of a massive £5 billion housing boost for 2025-26, all geared toward adding 1.5 million new homes over the next four years.

This could mean real opportunities in areas where demand often overwhelms supply, especially for affordable options. While 5,000 new homes won’t solve the crisis overnight, it’s a meaningful step that could alleviate market pressures and expand access to the starter homes so many are searching for. This investment is a hopeful signal for mortgage newcomers, bringing them closer to their goal of owning a home - though realistically, it’s one part of a larger puzzle that still needs more pieces.

6) Right to Buy discount cuts: a balanced approach

The Right to Buy program has given council tenants the chance to purchase their homes at a discount, but this budget introduces a reduction in those discounts. Instead of prioritising home purchases, the government is keeping more homes in the social housing pool - good news for people looking to rent affordably and for first-time buyers eyeing the market.

Although tenants might not see as steep of a discount, this shift could benefit entry-level buyers by balancing supply in the housing market. With more homes remaining in the affordable housing sector, there is less pressure on prices overall and homes remain accessible for renters and buyers alike. This provides more stability in the market and makes it easier for new homebuyers to find a property without breaking the bank. It is another strategic step toward a more accessible housing market.

The Autumn Budget left some questions hanging in relation to support for aspiring homeowners who’ve been hoping for a helping hand onto the property ladder. A notable absence was more detail on the widely discussed “Freedom to Buy” scheme, which promises to transform the Mortgage Guarantee Scheme into a more accessible path to homeownership for people with low deposits. This could be a huge boon for those feeling stuck saving for a hefty deposit while paying rent.

The dust has settled on the Autumn Budget 2024, and the verdict is in: the government has taken a decidedly mixed approach to supporting first-time buyers and home savers. On one hand, there are some genuine reasons to be hopeful - the stamp duty raises on buy-to-let, shakeup of IHT tax rules, and the boost to affordable housing construction are welcome changes. But on the other hand, the glaring omissions, like the lack of meaningful Lifetime ISA reform and the uncertainty around the "Freedom to Buy" scheme, have left many feeling frustrated.

Ultimately, the true test will be whether these initiatives can truly make a dent in the housing affordability crisis - a challenge that will require unwavering, multi-pronged action from policymakers. For now, future homeowners must navigate a landscape that is part triumph, part treachery. One thing is crystal clear: the road to homeownership remains a relentless uphill battle, and the government's role in paving the way forward will be scrutinised with eagle-eyed intensity in the years to come.

At Habstash, we’re committed to helping first-time buyers tackle this challenging journey by providing tools and insights to make homeownership more accessible. To try out our platform, sign up to our waitlist and take the first step towards your own home.

The Autumn Budget 2024 brings new measures impacting first-time buyers and deposit savers. With an extension on stamp duty relief and new housing construction goals, some doors open wider, while others remain just out of reach. We break down what’s new, what’s unchanged, and what might just help you make that first step onto the property ladder.

From stamp duty changes to affordable housing boosts, the Autumn Budget 2024 brings wins and challenges for first-time buyers. Discover how this budget could shape your homeownership journey.

How the Autumn Budget 2024 Impacts First-Time Buyers and Home Savers

What the UK Autumn Budget 2024 Means for First-Time Buyers and Home Savers

Navigating the property market can be a daunting task, particularly if you’re trying to get on the ladder to buy a house for the first time. With demand for housing at an unprecedented high, it is important to be proactive when it comes to ensuring everything is in place to help you secure that all-important mortgage.

With this in mind, we’ve decided to put together 7 ways to fast-track your way towards owning your first home. By following these money-saving tips for buying a house quickly, you will be well on your way to becoming a first-time buyer in no time!

First and foremost, it is important to have a clear and defined goal. Be realistic about the sort of property you can expect to afford, and remember that you will need to save somewhere between 10% to 20% of the overall property purchase price to lay down as a deposit. If you’ve been wondering “how much money should I save before buying a house?” then it’s worth considering that last year, the average first-time buyer deposit in the UK sat at around £53,935, which should give you an indication as to how much you should be putting away. In addition to putting a home deposit down on a property, you’ll also have to factor in things like stamp duty and conveyancing/surveyor fees, so remember to budget accordingly for these as well.

One of the best tips to save for a home deposit is to gain some financial discipline. If you’ve been thinking about how to buy a house at a young age but are struggling to put away savings for the future, it may be time to draw up a budget. You can do this by creating a spreadsheet or using a dedicated budgeting app.

Don’t be afraid to scrutinise your incomings and outgoings in detail. It can be useful to categorise your outgoings, into essential and non-essential, for example. Rent, bills and car finance payments are the sort of things you can’t avoid, and would sit firmly at home in the “essential category”. For other things like subscriptions to streaming services, takeaway coffees and nights out, you might spot ways in which you can curb your spending to save a little more toward your first property.

Arguably the best way to save money to buy a house is to try practising the 50:30:20 ratio rule. Put 50% of your incoming wages aside for needs (your fixed costs), 30% for the things you enjoy doing, and 20% into your savings pot toward your mortgage deposit. Of course, if you have debt to pay off, then be sure to allocate a  portion of your pay and pay back any outstanding debts.

Finding a way to earn a little bit of extra cash outside of your nine-to-five can help to seriously boost the coffers when it comes to saving money for a mortgage deposit. So many people have got the potential to earn from hobbies without even realising it! If you’ve got a creative talent like crafting, drawing or painting, you might want to consider setting up an Etsy page or advertising your work on local social media groups.

Alternatively, you might want to branch out into freelancing. The gig economy is at an all-time high, with everything from writing to coding and data entry tasks available. Many of these freelance tasks can be performed from home, which is ideal for evenings after work or during a quiet weekend.

When saving, where you invest is crucial. It can be beneficial to do a bit of research on the different types of investments and savings accounts available (ISAs for example), and you’ll want to gain an understanding of passive income and compound interest.

The power of compounding is that it helps to grow your savings exponentially. By adding the profits earned on your investments/savings back to the principal amount and then reinvesting the entire sum again, you’ll essentially accelerate your profit-earning capability.

If you’re wondering how to buy a house quickly, you should familiarise yourself with the current government schemes in place to encourage first-home ownership. Take the Lifetime ISA as an example. Lifetime Individual Savings Accounts can be used to purchase a first home, and can be opened by anybody between the ages of 18 and 40.

The beauty of the Lifetime ISA is that you will receive a government bonus of 25% of the total amount you pay in, up to a maximum of £1,000 per year. This can go a long way towards getting your first step on the property ladder.

Reducing your rental costs will help you to save quite rapidly. While some of these tips may sound less than ideal, it’s important to remember that your long-term goal is to save enough money to enable you to buy your own property. If you want to get on the property ladder as quickly as possible, this will mean making some small sacrifices along the way.

Consider downsizing, moving to a nearby area with lower rents, temporarily moving in with parents or finding a flatmate to help reduce rental costs. The less you pay in rent, the more you’ll be able to save, think short-term inconvenience for long-term gain.

Small savings can really add up. Before making a purchase, don’t be afraid to shop around or even ask for a discount. Get in touch with retailers (either online or in-person) and ask if they have any discount codes. Alternatively, wait until the seasonal sales before making non-essential purchases, and take advantage of special offers as advertised by retailers.

By setting clear goals and building good money habits that will stick, you will get closer to your dream of buying a house. Picture a money bucket; take steps to increase the flow of money through savings/investments and side hustles and reduce the leakages through downsizing and discounts.

Whether you’re ready to start saving or have already been implementing these methods for some time, why not use our Home Affordability Snapshot to find out the types of properties available to you under your current circumstances and budget? This can help you to develop a realistic picture of what you can afford, and could also be useful in mapping out what you need to do to get on the property ladder in the near future.

Navigating the property market can be a daunting task, particularly if you’re trying to get on the ladder to buy a house for the first time. With this in mind, we’ve decided to put together 7 ways to fast-track your way towards owning your first home. Read more to find out how you can kick-start your way to becoming a first-time home buyer.

Follow these useful tips and get on the property ladder in next to no time.

7 ways to own a home faster

When deciding whether to rent or buy a house, there are a host of factors that come into play when making your decision. Sadly, there is no one-size-fits-all when it comes to homeownership or choosing to rent a home. Many find themselves caught between a rock and a hard place, with would-be first-time buyers struggling to meet all the requirements.

House prices are currently at a record high, rising faster than average wages for several years now. Home affordability, on the other hand, is at an all-time low. According to UK government’s statistics, home ownership has dropped from 71% in 2003 to 65% in recent years. In this latest blog post, we ponder the question 'should I rent or buy a house?', discover the pros and cons of renting vs buying a house and how Habstash can help you determine your affordability when buying a property.

Alongside purchase prices, records have shown that rental costs have also reached high levels unheard of in previous years. With seemingly no easy option, it may leave you wondering is renting a waste of money and whether it's better to commit to buying.

Choosing whether to rent or buy a property largely depends on your personal situation and idealised future. For example, a home purchase can be a good idea if:

You have a partner with whom you plan on staying together long-term

You have the funds to put down a home deposit, whilst also taking into consideration extra costs like stamp duty and legal fees or you're lucky enough to have financial support from parents/family members

You earn enough monthly to pay a mortgage and still live comfortably

You have an income cushion in case interest rates go up and your monthly payments increase

Most people grow up dreaming of owning their own home one day. This is due to the sense of pride that comes with owning a property, that you can call your own and perhaps raise a family in the future. It also feels more satisfying knowing that your monthly payments are going into your house, rather than a landlord's pocket.

Financially, purchasing a home is more profitable than renting in the long run. This is because home prices can rise, which in turn adds equity to your home. So, when the time comes to sell your home, you could make more than you initially paid. It’s no surprise that first-time buyers should aim to get onto the property ladder sooner than later.

One of the joys of buying a new home is the DIY projects you get to undertake. Property ownership means you have the freedom to make the home your own, especially if you're a young buyer who has never owned a space before. This means the ability to decorate and restructure interiors, and the possibility to extend or build on the land if it’s a house.

Buying a property is a massive commitment, and though homes can always be sold in the future, it's important to know that you will be tied down to a location for a number of years. If you're considering wanting to live in different locations, buying a home may not be the best option for you. For example, you may be a recent graduate wanting to travel before getting your own place. to go traveling before settling down.

With house ownership comes responsibility for the property. This means forking out money for building repairs, as well as updating interiors. This is worth considering if you have less savings to fall back on.

To be eligible for a mortgage, a significant deposit is required. This can eat into your hard-earned savings, as well as your monthly income for hefty mortgage payments. Consider whether you're able to afford a mortgage and also live a good quality of life without significant money worries.

The great thing about renting is that you aren't tied down for years at a time. This gives you the flexibility to vary your living location and learn which area and type of property are best for you. 

In the short term, renting is cheaper than taking out a mortgage. Rental fees, which include a security deposit and agent fees, are significantly less than any home deposit plus home buying fees, and your monthly rental costs may be less than your monthly mortgage payments. This may be your only option, especially if you’re young and starting out in a new career with less financial security.

A mortgage is essentially the biggest loan anyone can take out, it can leave you financially restricted and tied down for a large chunk of your life. Renting gives you the freedom from worrying about paying a mortgage for the foreseeable future, which is why it works for younger people still figuring out their path in life.

Renting comes at the opportunity cost of delaying your dream of buying a home. This means you'll essentially never be able to gain back any of the money you spend while living there. You also have no say in how long you live there, or whether the landlord goes on to sell the property. Renters were hit pretty hard during the Covid-19 pandemic and were only able to retain their homes due to measures put in place by the government including a complete ban on evictions. 

Though initially renting can be cheaper, you’ll spend more money in the long run. This is because you can never get any of the money back that you invested like you would in a house sale.

If the property isn’t to your taste or style, you’re limited with the home improvements you can carry out when renting. This means you could be living in a property that doesn’t make you feel completely happy or comfortable. When you begin a new chapter with a partner or even move out of your parents' home, you may want the space you live in to feel like home. 

When it comes down to it, buying vs renting property largely comes down to your personal situation and what you can afford. When renting, you don't want to be doing it for too long. So, even if you have to continue to rent, start planning and set a target for your home deposit. Here at Habstash, we want to help you find out how much you can afford when buying a home to make your homeownership dreams become a reality.

When deciding whether to rent or buy a house, there are a host of factors that come into play when making your decision. Sadly, there is no one-size-fits-all when it comes to homeownership or choosing to rent a home. Read more to understand more about the benefits and disadvantages of renting a property and buying a home.

Discover all the pros and cons of renting vs buying a property, plus how Habstash can help you determine your home affordability.

Should you rent a property or buy a home?

Here’s a topic that everyone is currently talking about: inflation and the rising cost of living. Covid-related supply problems and the war in Ukraine are the immediate causes. Food, fuel and energy prices have been increasing at rates not seen for more than a decade. In these times, it is understandable that for many of you, stashing money away becomes all the more difficult. This includes saving for your first home. But that you must start (or continue) should be a top priority. Even if you’re young and not yet ready to buy a property, you should start saving for a house as early as possible.

For several years now, house prices have risen at a faster pace than earnings, and housing affordability has worsened across all regions in the country, not just in London and the South East. House prices in relation to earnings are at record levels, and just in England, the median house price to median earnings multiple hit over 9.0 in 2021 compared to 6.8 a decade ago. This means you will need to save more money for your house deposit than ever.

Buying a home requires a habit for saving 

With such challenging house affordability levels, getting on the housing ladder will not be easy. Setting money aside should be a discipline that you cultivate early. Typically, you were once financially dependent on your parents. After you graduated from university, moved out of your family home, and started developing your career, your choices and spending decisions have a major impact over time on your personal finances. A September 2020 research study by Aviva found that a silver-lining of the Covid lockdowns was that “nearly two-thirds of people have become more of a saver”. By eating out less, taking fewer holidays and spending less on personal goods, people have handsomely boosted their savings. For many, the habit has stuck and they have vowed to maintain such new saving habits. Aviva predicts that 28% of people aged 25-34 are likely to maintain these saving habits. This can be the holy grail to you buying your first dream home.

Say you begin saving at the age of 24 and put away £300 consistently each month over the next 6 years. By the time you’re 30, you’ll have saved a pot worth £21,600. With a 10% home deposit, you could afford a property worth £216,000. This can be higher if you can muster any additional savings, investments and contributions from Bank of Mum and Dad (BOMAD).

Putting down a larger home deposit is more advantageous 

When you have saved enough and are ready to buy your home, you’ll approach lenders for a mortgage. The most important thing that affects what price you can afford for a house is how much you can borrow.  And how much you can borrow is determined by the lender, principally from your earnings and your deposit. They apply rules based on Loan to Income (LTI) and Loan to Value (LTV) ratios. The government launched the much-publicised Mortgage Guarantee Scheme in April 2021, where lenders can lend up to 95% of the value of a property. However, as enticing as it may sound, if you have only a 5% deposit, net of stamp duty and other home-buying fees, the lender will charge you a risk premium with a higher interest rate. This couldn’t have been put more clearly than in the words of money saving expert, Martin Lewis who advised: “bear in mind that rates tend to be MUCH higher if you’ve got less than 10% deposit, so if you can push for a 10% deposit then you’ll get access to a cheaper mortgage”.  In short, save early and save enough for a minimum 10% deposit.

Saving money early can result in extra investment gains

If you are convinced, then start saving for your house early and give yourself a few years before your home purchase. If you are in a relationship, then convince your partner to do the same. Starting early allows you to benefit from gains on your savings over time through the power of compounding. It can be understood as ”adding interest on interest” and can create a snowball effect on your savings.

There are multiple ways you can realise these gains. For example, you can open a tax-free ISA account and if appropriate, a Lifetime ISA (LISA) account that would be boosted by free government cash of up to 25%. You can also invest your savings in fixed deposits and low-cost stocks and shares portfolios that are suitable for your situation, especially your time horizon. With stock & shares, you could experience gains from dividend income compounding. The key factors in making it work in your favour are time and consistent saving behaviour. Do it right and you have now embarked on the right path to one day soon owning your dream home.

The current climate should be a catalyst for you to start saving for a house now. Ideally, you want to give yourself time to cultivate good savings habits, save up enough for a home deposit and experience those gains on your savings. If you’re thinking about getting your own home one day, check out Habstash to see types of homes in your desired area that are closest to your affordability.

Here’s a topic that everyone is currently talking about: inflation and the rising cost of living. In these times, it is understandable that for many of you, stashing money away becomes all the more difficult. This includes saving for your first home. Read more to understand why you should start saving for a home now.

Realise the importance of saving for a house early and how Habstash can help you, as a first-time buyer, get started on the path to homeownership.

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