How long do young teachers need to save for a house deposit?

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

Affordable housing for young teachers is a pertinent issue as it is for many people young professionals starting out in their careers and trying to save a house deposit.

With one in three young teachers saying their housing situation has an impact to do their job effectively, the topic of affordable housing needs to be examined in more detail.

UPDATE: We have decided to update this blog post from over 5 years ago as many of the issues are just as relevant today, if not more so! Interest rates are at a 16-year old high (currently 5.25%), affordability for housing is still a key issue for teaching staff and teaching assistants.

I thought it would be an interesting experiment to calculate how long it would take for the ‘average young 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 12 years, and that’s even at a conservative estimate.

The ‘average’ teacher saving towards the ‘average’ house price can take up to 12 years …

Previous research on this topic on first-time buyer deposits, quite often from banks and estate agents, 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 variable inflation and interest rates will have an impact on take-home pay, savings and house prices over time.

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

• Meet Emma, (the average teacher is female), who is 23 and single (most young people are single). She will start saving her deposit as an individual with no support from family or partners

• She teaches in a maintained primary school (the majority of teachers are in primary schools compared to secondary) and her employment contract is linked to the School Teachers’ Pay and Condition Document (most employment contracts for teachers will be linked to the main teacher pay scales)

• She has completed the PGCE route into teaching (the majority of teachers enter into the profession using this route) PGCE fees cost £9,250. Emma also has the ‘average’ amount of student debt (£45,600) completing a three-year history degree at the University of Nottingham.

• She lives in rented accommodation in Telford, Shropshire with one other flatmate. 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.

• Her monthly rent is £850 (which is the median rental price for a property in Telford) She also contributes to gas, electric, broadband, petrol, council tax and tv licensing bills with her housemate. £1000 – £1200 of her monthly pay is spent on rent and household bills.

• 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 £1,600 – £2,600 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.

• According to the UK House Price Index, the cost of the average house in England is £280,660. For this experiment, we will aim at saving enough to afford the average house price in Shropshire (£285,487).

• I have chosen Shropshire as this is the location where the majority of homes are around 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 £28,000. The monthly repayments would be £1,496 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 £56,132. The monthly repayments would be £1,330 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 it would still be extremely tight.

• To be able to save £56,132 in as short as time as possible, Emma would have to take advantage of a Lifetime ISA (LISA). 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 11 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. To afford solicitor fees, new furniture and other costs could take an additional 12 months, bringing the total time for saving to 12 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, 12 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.