At a time when four successive base rate rises have failed to dampen house prices with mortgage lending in April 18 per cent higher than a year ago and pushed up the cost of getting on and staying on the property ladder, the latest research questions whether a nation of financially-stretched first time buyers know what they are buying, and whether desperation to get a foot on the ladder is forcing them into rushing decisions.
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According to a new Safe as Houses homebuyer report from AA Legal Services, around 20 per cent of UK adults did not know what a freehold mortgage was and 49 per cent thought a leasehold mortgage was something other than it was.
An accurate understanding of this most basic property term was lowest among 18-24 year old homebuyers. With young homebuyers planning to spend an average of £159,653 on their first home, only 59 per cent knew what the term freehold meant and only 57 per cent understood the term leasehold.
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A number of young homebuyers had some wild ideas on what property terms meant. Around 10 per cent of 18-24 year olds said that a leasehold property meant you were allowed to rent it to tenants, and 2 per cent thought it meant the homeowner was exempt from council tax.
When it came to defining a freehold property, 9 per cent of 18-24 year olds believed this related to a property with a lease of 50 years or more and 6 per cent thought freehold properties were exempt from Capital Gains Tax.
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Perhaps alarming, 2 per cent of young Brits thought freehold properties could only be bought by freemasons.
The research also suggests a north-south divide was emerging, with people north of the Midlands less able to define a leasehold property than people in the south. People in the property-booming North West were least able to define what a leasehold property was.
James Molloy, head of AA Legal Services, said: Our research suggests that many homebuyers are so desperate to get onto the property ladder that they may be over-looking vitally important legal principles.
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For years, the legal community has not helped much in terms of engaging the public on legal aspects of home buying, something AA Legal Services intends to put right by helping the public understand legal issues in plain English, so that they can make informed home buying decisions and feel in control of the process.
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