New research from Aldermore has revealed the lack of understanding around the house buying process and the associated costs amongst those looking to buy their first home.
The biggest expense when buying a home is saving for the deposit and this remains the number one obstacle for over one in three first-time buyers. However, prospective buyers are falling short in their estimations of how much they need for their first deposit
The average deposit needed is £49,639 according to the ONS.
With the average first-time buyer aiming to save an average of £34,397 for a deposit, this means they face a deposit deficit of 31% – or £15,388.
Prospective first time buyers are also underestimating the amount of time it will take them to save for a deposit.
Almost three-fifths believe they will be able to reach this goal within five years, while in reality just half of recent first-time buyers reached their goal in this time. One in seven took over eight years to get there.
When it comes to all the additional costs associated with buying a home such as solicitor’s fees and stamp duty, almost one in three (32%) prospective first-time buyers simply don’t know how much all of this costs.
For those who have recently managed to get on the property ladder, two in five (40%) spent more than expected on these extra costs, by an average £2,334.
First-time buyers also have to take into account the potential costs of a property purchase falling through. Almost half (47%) of first-time buyers who bought this year experienced the collapse of a property purchase, at a cost of £1,305. More broadly, over a quarter of those (26%) who bought over the last three years have also experienced this, evidencing just how exposed first time buyers are within the current housing environment.
Charles McDowell, commercial director of mortgages at Aldermore, said: “It is clear there is a divergence between perception and reality when it comes to the house buying process. This often means those looking to buy are under-estimating the associated costs as well as the time it could take to complete, especially with first time buyers expecting it to take four years on average to save for a deposit.
“This lack of understanding clearly has financial implications but it can also take its toll emotionally. Our First Time Buyer Index carried out in the second quarter of 2017 revealed nearly one in five recent first time buyers took three or more attempts to buy their home and the process of buying a first property caused so much stress over one in three were made ill.
“Some have suggested that the Government plans to announce cutting stamp duty for first time buyers, in the Autumn Budget, a step we would welcome. As it stands, first time buyers are systematically let down by an overly complex, opaque and costly system.”
