How to grow a house deposit in five years Save smart Use your Isa allowances - which keep savings returns tax-free - to benefit from growth on your savings. At present you can put a total of £11,520 a year into a stocks and shares Isa and £5,760 into a cash Isa. As well as the tax advantages, cash Isas tend to offer better interest rates than normal savings accounts. One of the best rates on offer at the moment is the Post Office's Premier Cash ISA Issue 5, which is offering a 1.8pc variable rate for 18 months, and slightly higher returns are available if you agree to lock away your money for a set period. Only if you are feeling braver - and are expecting to build your savings over five years or more - should you consider opting for higher-growth, higher-risk options like funds invested in the stock market. So-called multi-manager funds, which invest in both shares and bonds, are less volatile than shares-only funds - but often charge higher fees than the average fund. Costs are a factor, and you should limit them as far as possible. Jeremy Le Sueur, of 4 Shires Asset Management, said: "Pick a selection of low-cost investment trusts as core holdings, such as City of London, Bankers, Scottish Mortgage and Law Debenture, which have a good geographical investment spread." Another option is to put money into a "tracker" fund, which aims to simply mirror a stock market's performance. These charge less than funds and on average beat the majority of actively managed funds. But if the stock market falls - so will your deposit. If you choose to use stock market investments, start to realise profits and switch into cash as you near the point of making an offer - as this will give you certainty over how much money you can spend. Take advantage of special mortgage-linked saving accounts There are a number of special mortgage savings accounts that offer better terms for first-time buyers compared with normal savings accounts - although they are not always available. Nationwide's Save to Buy account offers an interest rate of 2pc and the opportunity to apply for a 95pc mortgage once you have saved for at least six months. Savers who are granted a mortgage receive the added bonus of a cashback reward up to £1,000. This works in both the lenders' and borrowers' interests, because the lenders have more evidence on which to base its decision. Chris Rennocks and his fiancée Janie Sheldon are in the process of moving into their first home in Long Eaton, Nottinghamshire, after using Nationwide's Save to Buy scheme. Mr Rennocks, an electrician, 27, and Ms Sheldon, 25, a hairdresser, saved into the account for six months and have been granted a 30-year mortgage. The couple raised 5pc of the property's £125,000 price by saving into the scheme and through help from their parents. "We anticipated it would take a lot longer for us to get on the property ladder, but given that you only need a 5pc deposit to get a mortgage, the scheme has been ideal for a couple like ourselves who would find it difficult to raise more than 10pc for a deposit," said Mr Rennocks. There are other arrangements where first-time buyers can benefit from parental help. The Lend a Hand savings account from Lloyds Bank allows parents to guarantee a deposit by leaving money on account. This gives first-time buyers with just 5pc to put down, the same mortgages rates as are available to those who have raised a 25pc deposit. Meanwhile, the parents enjoy a fixed return on their capital of 2.67pc gross for three and a half years. Lock into housing profits without buying There are a number of ways to profit from rising house prices while you are saving for your first home. Over the past decade property prices have risen far faster than deposits in a bank or building society. First-time buyers saving into cash-based investments can often find themselves chasing a target that keeps on moving out of their reach. One fund that promises to match, or exceed, the growth in house prices is the TM Hearthstone UK Residential Property fund. Units in the fund can be bought and sold at any time, as although the fund invests in actual properties, it also keeps about 15pc of assets in cash and property shares. This means that the managers are not forced into selling property at a loss if investors want their money back. Another option is Castle Trust's HouSA fund, which aims to beat the house price index by 25pc over three years. Castle Trust is able to offer these returns by lending investors' money to home owners, via a secured loan, and sharing in the gain in house prices instead of charging interest. But property investments are a lot riskier than savings accounts. If house prices fall, so will your savings. Cut back on your discretionary spending One basic necessity is to work out your monthly outgoings. Once you have done this, you might realise how much you are spending on unnecessary luxuries. Whether you are going it alone, or as a team with your partner or spouse, you need to scrutinise all your spending. Sarah Lord, a financial planner at the broker Killik, said it is the small expenses that add up. Making your own lunch and shopping around for better insurance deals can help make big savings. It is essential to look at every penny spent in your existing monthly budget before you start saving. It really is the small luxuries you can save hundreds of pounds a year on, such as cutting out your daily cup of coffee on the way in to work. This is simple, but really effective in the long run," said Ms Lord. Next, assess your living situation: do you have the option to stay with friends or family for a fixed time while you raise the money you need? As average London rents hit £1,100 per month, according to LSL Property Services, would-be buyers are ploughing much of their hardearned cash into landlords' pockets. It's also worth considering downsizing in the short-term for the long term gain. If friends and family aren't an option, consider researching a house share. A couple forking out £1,100 per month for a flat of their own could switch to a £600 double bedroom in a house share, meaning you could save an extra £6,000 a year. Factor stamp duty, legal fees and other costs into your plans Finally, do not forget to put some savings aside for legal fees and stamp duty, which can end up costing thousands of pounds. You also need to put some money in reserve for survey fees, insurance and, of course, moving fees. Stamp duty is 1pc for houses costing between £150,000 and £250,000, rising to 3pc if you're buying up to £500,000, and 4pc for homes costing more. For the average £247,000 home, buyers will have to fork out £2,470. Legal expenses vary, but can set you back around £500 plus VAT. Legal fees are often forgotten in the deposit calculations, which can lead to a bit of a last-minute panic. First-time buyers need to factor in these charges when they are saving," said Ms Lord.