In the context of property, a deposit is an amount of money that you pay, which is a percentage of the full cost of the property you want to buy. Deposits are paid so that a bank or lender will give you a mortgage to pay off the rest of your property. The more money you save up for a deposit, the less you will have to pay back through mortgage instalments.
How much deposit do you need to put down for a house?
How much deposit you will need to put down for your house depends on the price of the property.
It is technically possible to get a mortgage with a deposit of 5 percent of a property’s value.
In the current market, however, you might find you need as much as 10 percent or even 15 percent, as many lenders have withdrawn their low-deposit deals due to economic issues caused by coronavirus.
For a property costing £200,000, this is how much deposit you would have to put down:
Five percent deposit – £10,000
10 percent deposit – £20,000
15 percent deposit – £30,000
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To calculate how much you will need to save for your mortgage deposit in cash terms, there are two things you should consider.
The first is typical property prices in your area.
You can get a rough idea of local house prices from property portals such as Zoopla, and by speaking to local estate agents.
Bear in mind that prices you see online and agent websites will be using prices, so they are likely a bit higher than the property’s actual value.
How has coronavirus changed house prices?
It is still too early to tell how much coronavirus has impacted house prices.
However, the coming months are likely to see a significant fluctuation in prices as the true impact is exposed.
The most reliable measure of house prices is the Land Registry’s UK House Price Index.
Although the index was suspended during the lockdown, but delayed figures for May showed a 0.3 percent month-on-month drop, and 2.9 percent year-on-year rise in prices.
The Land Registry says it will be back on track with scheduled reports by October 21, by which time we will have a clearer indication of what has really happened to house prices.
RightMove’s index, which is based on asking prices rather than sold prices, showed a 0.2 percent month-on-month drop in August.
Nationwide’s index, which is based on mortgage lending, reported a 2 percent month-on-month rise in prices.
Halifax, which also bases its data around lending, predicted a 5.3 percent increase.