Wealth Check: 'Is now a good time to get on the property ladder?'

Simon Meredith, 28, lives in a rented flat in south London with his girlfriend. He works full-time as a computer programmer but also earns a significant amount of his income from his work as a musician.

Simon has aspirations to run his own IT business in the future but right now is saving money to buy a house. He wants some advice on what the best options for mortgages are, as well how much he should be saving, both for the short and long-term.

"I'd like particular advice on buying a property; when a good time would be, whether interest rates are going to increase significantly, whether to go for a fixed-rate or tracker mortgage, what the minimum sensible deposit would be, and so on," Simon says. "We're currently aiming to have a 15 per cent deposit to put down on a property worth about £200,000. Would it be better to rent for longer and get a bigger deposit?"

Case notes

Salary: £40,000
Savings: £2,000 in deposit accounts and £4,000 in an ISA
Monthly outgoings: £2,600
Debt: £10,000 student debt

Offering their advice this week are Danny Cox from Hargreaves Lansdown, Duncan Carter from Clearwater Financial Planning and Ian Hudson from Hudson Green and Associates.


Cox begins by addressing Simon's concerns about rising interest rates and whether he should play it safe with a fixed-rate mortgage.

"I favour fixed rates for first-time buyers simply because they protect them from additional cost at a time when money can be at its tightest. Fixed-rate deals tend to be more expensive than other discounted or variable rates. However, knowing that mortgage costs will not rise is a great comfort."

Carter also favours fixed-rate mortgages, adding: "Although this can't be guaranteed I would expect interest rates to rise over the next 18 to 24 months and the conventional way of managing interest rate risk is to either fix or have a mortgage with a cap on the variable rate."


Carter thinks Simon is being sensible to save for a deposit as he is unlikely to find a mortgage lender given his current financial profile. But Cox warns that Simon is going to need more than just his deposit money if he wants to buy a house, as he's need cash to cover legal fees, removal costs and much more.

Cox says: "Simon and his girlfriend should continue to use a cash ISA to save in, since this is one of the most tax-efficient ways to save. There is no tax on the interest and they can each save £3,600 this tax year and £5,100 from April."

"Simon's combined income is around the level at which higher rate tax is paid, £43,875 making an ISA even more important, since taxable savings would suffer as much as 40 per cent tax. Simon is right to think that he should move the money from his current account into a cash ISA to get a better tax-free return."

Life insurance

As well as saving for a mortgage, Hudson is keen to emphasise the importance of saving for the unexpected. "You are the only reason you receive income, therefore it is pretty important to consider insuring yourself against your inability to work through long-term illness or accident. Could Simon continue working and earning a good wage if he were not able to perform his music or his work?


Simon also wants to take early retirement and currently pays into a final salary pension scheme with his employer. He hasn't been paying into it for very long but Cox certainly supports the scheme.

"This is a great way to build retirement savings but if Simon is to achieve his wish of early retirement, he is likely to have to save more than he is at the moment. The final salary scheme is likely to have its best value at the normal retirement date, 65. If early retirement were allowed (and that isn't always possible) Simon's pension will be reduced, typically 3 per cent per year. In other words retiring at 60 could cost 15 per cent of Simon's pension.

"For these reasons, Simon may need to consider other pension savings, perhaps a private pension. The advantage with a private pension is that benefits can be taken from age 55. For every £100 Simon saves, the Government adds £25 making it a very tax efficient way to save."

The future

Duncan Carter summarises Simon as someone looking to lay foundations for longer term financial stability.

"Having capital available will create more opportunities to purchase property and possibly start his own IT consultancy in the medium to longer term. I would focus on the next two to three years as being the financial cornerstone and allow other plans to develop once this solid base has been established."

Ian Hudson adds: "Always review your financial goals, aspirations and plans regularly. This allows you to check your progress and to make adjustments as necessary. Financial plans are much like any other plans – if you ignore them and pay them only lip-service, they are unlikely to turn out as you expect."

For a free financial check-up, write to Wealth Check, The Independent, 2 Derry Street, London W8 5HF; or email wealthcheck@independent.co.uk

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Arts and Entertainment
The teaser trailer has provoked more questions than answers
filmBut what is Bond's 'secret' that Moneypenny is talking about?
football This was Kane’s night, even if he played just a small part of it
travel Dreamland Margate, Britain’s oldest amusement park, is set to reopen
Founders James Brown and Tim Southwell with a mock-up of the first ever ‘Loaded’ magazine in 1994
Threlfall says: 'I am a guardian of the reality keys. I think I drive directors nuts'
voices The group has just unveiled a billion dollar plan to help nurse the British countryside back to health
The Westgate, a gay pub in the centre of Gloucester which played host to drag queens, has closed
Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Retirement Coordinator - Financial Services

    Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

    Recruitment Genius: Annuities / Pensions Administrator

    Negotiable: Recruitment Genius: You will be the first point of contact for all...

    Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

    £18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

    Ashdown Group: Learning and Development Programme Manager

    £35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

    Day In a Page

    The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

    The saffron censorship that governs India

    Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
    Prince Charles' 'black spider' letters to be published 'within weeks'

    Prince Charles' 'black spider' letters to be published 'within weeks'

    Supreme Court rules Dominic Grieve's ministerial veto was invalid
    Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

    How did fandom get so dark?

    Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
    The galaxy collisions that shed light on unseen parallel Universe

    The cosmic collisions that have shed light on unseen parallel Universe

    Dark matter study gives scientists insight into mystery of space
    The Swedes are adding a gender-neutral pronoun to their dictionary

    Swedes introduce gender-neutral pronoun

    Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
    Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

    Disney's mega money-making formula

    'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
    Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

    Lobster has gone mainstream

    Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
    Easter 2015: 14 best decorations

    14 best Easter decorations

    Get into the Easter spirit with our pick of accessories, ornaments and tableware
    Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

    Paul Scholes column

    Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
    Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

    The future of GM

    The greenhouses where Monsanto 'plays God' with the future of the planet
    Britain's mild winters could be numbered: why global warming is leaving UK chillier

    Britain's mild winters could be numbered

    Gulf Stream is slowing down faster than ever, scientists say
    Government gives £250,000 to Independent appeal

    Government gives £250,000 to Independent appeal

    Donation brings total raised by Homeless Veterans campaign to at least £1.25m
    Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

    The most borrowed book at Bank of England library? Oh dear

    The book's fifth edition is used for Edexcel exams
    Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

    Cowslips vs honeysuckle

    It's the hunt for UK’s favourite wildflower
    Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

    Did a botched blackmail attempt help Cyril Smith escape justice?

    A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss