House deposits for teachers: how many years does it take?

Affordable housing for teachers is a pertinent issue as it is for many people young people starting out in their careers.

The TES has reported on the growing number of teachers who are on the verge of homelessness. In addition, the DfE has also set up LocatEd which is looking at developing housing on school sites “including teacher housing where there’s a problem.”

I thought it would be an interesting experiment to calculate how long it would take for the ‘average teacher’ to save towards a house deposit for the ‘average’ house price in England.

Everyone has unique circumstances and there are lots of variables at play. It’s worth noting that the majority of first-time buyers would probably not purchase a house at the ‘average’ house price, but theoretically it should be achievable for teachers one would hope.

However, for the ‘average’ teacher saving towards the ‘average’ house price it can take up to 10 years, at a conservative estimate.

The ‘average’ teacher saving towards the ‘average’ house price can take up to 10 years …

Previous research on this topic on first-time buyer deposits, from Nationwide and other banks, can be misleading at they look at saving towards the minimum amounts for a deposit (5-10%) which would lead to higher than average mortgage repayments and poor value for money in the long-term for the buyer (although not for the banks!). They also take into account shared ownership schemes and other products which consumers might stay clear of.

I have outlined the workings below, bearing in mind inflation and interest rates will have an effect on take-home pay, savings and house prices over the decade.

For this, I have created an example of a fictional teacher (Emma) who is likely to mirror the ‘national average’ of a young teacher.

  • She lives in rented accommodation in Telford, Shropshire with three other flatmates. I have taken an example of a teacher outside of London as the majority of teachers work outside of the M25 and do not receive London weighting in their salaries.
  • As a primary teacher, on an average career trajectory (not being catapulted into leadership positions or earning teaching and learning responsibility TLR payments in her first five years) her pay will sit between £1400 – £2,300 for the first ten years of her career. This is taking into account that Emma pays into the Teachers’ Pension Scheme (contribution rate 8.6% of earnings) and has student loan deductions each month. Roughly, her average take home pay for the first 10 years of her career is £1,800 per month.
  • I have chosen Shropshire as this is the location where the majority of homes are at the ‘national average’ house price. Of course, it will be cheaper or more expensive in other areas, but as a national average I am using this example.
  • We will work towards saving a 10% deposit which is £22,843. The monthly repayments would be £1,074 on a 25 year mortgage, according to the mortgage calculator on Rightmove.
  • However, Emma would not have much to live on if she was paying this amount each month! A 20% deposit would come to £45,687. The monthly repayments would be £955 per month on a 25 year mortgage. This might be a little bit more manageable if she bought with a partner, but as an individual would be extremely tight.
  • To be able to save £45,687 in as short as time as possible, Emma would have to take advantage of a Lifetime ISA (LISA) or Help to Buy ISA. With a LISA she would be able to save £4,000 per year with an additional £1,000 contributed to from the government. Saving £5,000 a year from 23, would take 9 years to achieve. If you take into account any interest gained or the performance of stocks and shares (depending on what type of LISA she chooses) it might cut her savings time by a couple of months. To afford solicitor fees, new furniture and other costs could take an additional 12 months, brining the total time for saving to 10 years.
  • So it depends if Emma is able to set aside £4,000 per year which should seem achievable to do if she stays in continuable employment, does not go on maternity leave and is not sick for any length of time
  • If she decided to buy with a partner who was earning the ‘average salary’ with a contributing deposit, the time it takes to save will be much shorter.

In summary, this is just one scenario of a teacher trying to save enough for a deposit for an ‘average’ priced house. I’m aware there are many different variables, however, 10 years is the closest estimation if Emma diligently saved, moved in with a partner and her employment situation stayed relatively stable. It is currently a very difficult housing market for first-time buyers and can seem impossible for some, especially if renting in London or the South East. It will be interesting to see if innovative solutions or financial products will arise as housing will continue to be a major issue for most of the workforce.

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