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Buying your first home? It’s time to get to get savvy with your savings. Financial journalist David Burrows explores how a stocks and shares ISA may be able to help.

Whether you’re taking your first step onto the property ladder or trying to move onto the next rung, buying a home can be a daunting prospect these days. In this article we examine the true cost of buying a home and look at how a tax-free individual savings account (ISA) that invests in the stock market could help you secure the all-essential deposit.

The cost of buying a home

According to HM Land Registry, as of March 2018, the average house price in the UK was £224,144. This is up 4.2% compared to the previous year. It is also a massive £55k higher than the average house price of £167,500 back in January 2010.

In certain regions, price inflation has been even higher than the national average. In London, for instance, the mean price of a flat in 1995 was £89,600. By February 2018, this figure had risen to £543,200 – over six times as much.

This huge price rise means bigger mortgages – and bigger deposits to secure those mortgages.

On top of the mortgage and deposit, homebuyers must also factor in the expense of stamp duty, conveyancers, estate agents and removal firms. According to the survey, the total of all these costs for the average UK house purchase currently stands at £10,000.

How to meet these costs

All of these costs mean that wherever you are on the property ladder, taking the next step will involve significant expense.

While we may be working hard to save towards our goal, low bank interest rates also mean that traditional savings accounts offer a poor return on our money. In this situation, an early investment in a stocks and shares ISA could be the answer – whether you’re a first, second, third or fourth time buyer.

An ISA is an Individual Savings Account. Every individual gets a new ISA allowance from the government for each tax year, and for the 2018/9 tax year, this is £20,000 for adults aged 18 and over. A cash ISA is a savings account with tax-free interest, whereas a stocks and shares ISA is a form of investment where income and gains are tax-free.

Rates, risks and returns

Choosing a stocks and shares ISA can pay off, but investments should be viewed as a medium to long-term commitment. It’s unrealistic to expect this vehicle to provide the funds required for a deposit in just a couple of years.

Positively different investments

VitalityInvest has a range of funds for investors to choose from, each designed to achieve a specific outcome.

Product charges vary according to the amount you have invested and vary from provider to provider. If you hold a qualifying* VitalityHealth or VitalityLife policy, invest in Vitality funds and take steps to improve your health, you could pay no product charges at all on the VitalityInvest Stocks and Shares ISA.

You can open a VitalityInvest Stocks and Shares ISA with as little as £50 a month, or a lump sum of £1,500 (there’s no minimum amount for further lump sums, which you can pay in at any time up to your annual allowance). You can stop, restart and vary the level of your regular contributions. You can also take money out and add it back in the same tax year without affecting your annual allowance.

Please remember, the value of investments – and the income from them – can go down as well as up, meaning you may get back less than you invest. This information is based on our understanding of existing tax legislation which may change in the future.

Want to start exploring your ISA options? Find out more about the VitalityInvest Stocks and Shares ISA here.

Important information

* Qualifying  plans are as follows:

VitalityHealth: Personal, Business or Corporate Healthcare plans with Vitality Plus.
VitalityLife: Policies with Vitality Plus, excluding Vitality Core and Vitality Lite.

The value of investments and the income from them can go down as well as up, meaning you may get back less than you invest.

This information is not a personal recommendation for any particular investment. If you’re not sure whether an investment is right for you, speak to an authorised financial adviser.

Remember that any tax benefits you receive depend on your tax position as well as current tax law, both of which may change in the future.

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