A popular topic covered by banks and financial guidance websites is how aspiring first-time buyers can save for a mortgage deposit.
Budgeting and cutting back on discretionary spending are some common tips offered when searching ‘how to save for a house deposit’ online. Opening a fixed rate savings account to benefit from a higher rate of interest, and setting up a standing order to encourage a regular habit of saving, are other pointers.
Lifetime Isas get a mention, too, for the 25 per cent top-up that the government provides on savings up to £4,000 a year. According to HMRC, 56,100 account holders took money out from their Lisa to buy their first property in the 2022-23 tax year.
But when it comes to saving for that seemingly elusive mortgage, one thing that is often missing from the list of ideas is saving in a stocks and shares Isa.
Although Lisas come in the form of stocks and shares, as well as cash, their suggestion to aspiring first-time buyers seems to be more about the £1,000 government bonus, rather than the potential benefits of investing.
While investors in recent years have also favoured cash as interest rates rose, rates are finally beginning their descent, however slowly. And when saving for a deposit can be such a slog, it seems amiss not to suggest to would-be homeowners that they consider investing.
Perhaps it is the potential for losses, and an abundance of caution, that are acting as deterrents to suggesting that first-time buyers invest.
On the other hand, when it comes to saving for retirement, it would be inconceivable if investing were not suggested. Granted, the investment horizon for retirement savers is typically longer, with the average retirement age for men and women being 66, according to the UK’s 2021 census.
But with the average first-time buyer being 32, as figures from Halifax last year show, and stocks and shares Isa providers generally suggesting that savers invest for at least five years, most aspiring homeowners will probably meet this minimum investment horizon.
It would similarly be inconceivable, assuming that it was suitable for the client, if advisers did not recommend to would-be first-time buyers that they invest when it comes to building up a property deposit.
The absent suggestion of investing for a deposit from online financial guidance pages, which would probably be an ordinary recommendation made to prospective homeowners if they were receiving advice, sustains a perception that investing is for higher income households.
Indeed, research by the Financial Conduct Authority in 2022 found that, among non‑advised adults with at least £10,000 in cash but no investments, almost half (46 per cent) believed they did not have enough money, or their financial affairs were too straightforward to consider investing.
