Saving for a house

It depends on the price of the property and your budget, but typically you’ll need a deposit of at least 5% of the property’s value. However, some buyers may aim for 10% or more to access better mortgage rates.

Knowing the price range of the homes you’re looking at will help you set a clear savings goal.

There are several government schemes to support affordable home ownership which could help you get on the property ladder sooner.

LTV (loan-to-value) ratio is how much you need to borrow compared to the value of the property, expressed as a percentage.

How LTV works:

• You buy a property worth £200,000 and pay a £20,000 deposit
• You get a mortgage of £180,000, as your deposit covers 10% of the property price
• Your LTV ratio is therefore 90%

The bigger your deposit, the smaller the LTV ratio will be. A lower LTV ratio can give you access to better mortgage rates, which could make your monthly repayments cheaper. That’s why LTV ratio is worth considering when setting your savings goal, as your deposit amount can have a big impact.

Saving for a house deposit can take several years, but the exact timeframe depends on:

• Your target deposit - Most lenders require at least 5%, but aiming for 10% or more can unlock better rates
• How much you can save each month - A realistic budget will help you stay on track
• Any savings you already have - A head start can significantly shorten your timeline

Taking advantage of the best interest rates and any government schemes available to you can accelerate your savings growth and reduce the time it takes to reach your goal.

Gross is the interest rate paid before tax is deducted.

AER (Annual Equivalent Rate) shows what the interest rate would be if interest was paid and compounded each year, helping you compare savings products. However, with our Fixed Rate Saver, interest is paid into your linked account either monthly or annually so is not compounded.

When you earn interest from a savings account that is not an ISA, it will count towards your Personal Savings Allowance.

This does not necessarily mean you'll pay income tax on the interest you earn, but it could if the amount of interest you earn goes beyond your Personal Savings Allowance. Most people can earn some interest from their savings without paying tax*.

The Personal Savings Allowance depends on what rate of income tax you pay:

• Basic rate (20%) taxpayers: £1,000 in savings interest per year with no tax.
• Higher rate (40%) taxpayers: £500 in savings interest per year with no tax.
• Additional rate (45%) taxpayers: £0 - additional rate taxpayers do not get a Personal Savings Allowance.
• If you're a non-taxpayer (you have less than £12,570 income per year), you may be able to earn as much as £18,570 in savings interest tax-free.

If you’ve been saving in an ISA, the interest you earn will not contribute to your Personal Savings Allowance. To learn more about how ISAs work, please see our guide What is an ISA and how do they work?

Tesco Bank will not deduct tax from the interest you earn. The tax rules set by HM Revenue & Customs are subject to change, and the value of tax benefits depends on your individual circumstances.

*Source: GOV.UK "Tax on savings interest"

ISA stands for ‘Individual Savings Account’.

When you save in an ISA, the interest you earn is tax-free - meaning you don’t have to pay income tax on it. The tax rules set by HM Revenue & Customs are subject to change, and the value of tax benefits depends on your individual circumstances.

There is a limit to how much you can save in an ISA within each tax year. For the current tax year, the ISA limit is £20,000.

This is the total amount you can save across all the ISA accounts you may hold combined - not per account.

You will not always have to pay tax on the interest you earn in a regular Savings Account, it depends if the amount of interest you earn exceeds your Personal Savings Allowance.

We do not offer a Lifetime ISA (LISA) at Tesco Bank, but here’s what you need to know about how they work. A Lifetime ISA is a type of savings account offered to 18 to 40-year-olds saving for their first home or later life.

Though Lifetime ISAs have a maximum deposit limit of £4,000 per tax year, they provide a 25% government bonus in addition to any interest rate offered by the provider. This is beneficial for first-time buyers looking to boost their deposit.

For example, excluding any interest you may earn, if you save £1,000 into your Lifetime ISA, you will receive a bonus of £250 taking your total savings to £1,250.

It’s worth noting, the £4,000 contributes towards your overall £20,000 ISA allowance for the current tax year.

Lifetime ISAs have deposit and withdrawal limitations as well as other eligibility criteria that may make them less flexible than other accounts available, please always check with your provider.

Yes, if you already have a Help to Buy ISA you can use this towards purchasing your first home. However, you cannot open a new Help to Buy ISA.

You can continue to pay into your Help to Buy ISA until November 2029 and claim the 25% bonus until November 2030.