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First Time Buyers underestimate the financial burden of home buying

POSTED: 1st November 2017
IN: Newsroom
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  • Perception vs reality: first time buyers across the nation face a deposit deficit of 31% - equating to £15,388
  • First time buyers in London are under-estimating the deposit they will need by £75,000
  • When buying their first house, two in five (40%) recent first time buyers overspent by £2,334 on extra costs such as solicitors fees and surveys
  • Nearly half (47%) of those who bought a home this year experienced a house purchase fall through, costing an average of £1,305                                                    

First Time Buyer Report Q3 2017According to the latest research from Aldermore’s Q3 2017 First Time Buyer Index1, there is a real 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 (34%) first time buyers. However, the latest research shows prospective buyers are falling short in their estimations of how much they need for their first deposit, aiming to save an average of £34,3972. In fact the average deposit needed is £49,639 according to the ONS – meaning many first time buyers will be faced with a huge deposit deficit of 31% equating to £15,388.

When examining this trend across the regions, this disparity is particularly evident in London. First time buyers looking to buy in the capital are aiming to save an average of £48,000 when in fact official figures show the average deposit is more than double at £123,000 which would leave them £75,000 short. Other regional disparities include:

 

Estimated First Time Buyer Deposit

Actual average First Time Buyer deposit (ONS)*

The Difference of between perception vs reality

Total

£34,397

£49,639

-£15,242

North East

£32,662

£24,937

£7,725

North West

£29,206

£28,252

£954

Yorks & Humber

£29,844

£27,555

£2,289

East Midlands

£30,427

£30,708

-£281

West Midlands

£28,275

£33,059

-£4,784

East of England

£33,536

£51,644

-£18,108

London

£48,222

£123,398

-£75,176

South East

£37,798

£61,491

-£23,693

South West

£26,441

£45,074

-£18,633

Wales

£27,963

£26,307

£1,656

Scotland

£22,579

£26,350

-£3,771


Prospective first time buyers are also under estimating the amount of time it will take them to save for this deposit. Almost three fifths (58%) believe they will be able to reach this goal within five years while in reality just half (51%) of recent first time buyers reached their goal in this time and actually over one in seven (16%) took over eight years to get there.

When it comes to all the additional costs associated with buying a home, extras such as solicitor’s fees and stamp duty, almost one in three (32%) prospective first 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, Mortgages: “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 (17%) 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 (35%) 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.

“At Aldermore, we are fully aware of the issues first time buyers face, and we want to do all that we can to support them when it comes to securing a mortgage. Our human approach to lending enables us to consider each case on an individual basis. We also offer various products to help first time buyers, including the family guarantee mortgage and 95% loan to value mortgages for customers who have a smaller deposit. We always recommend customers shop around to ensure they choose the best mortgage product for their individual needs.”

*Ends*

Notes to Editors

1The figures from Q3 2017 are sourced from a nationally representative survey conducted by Opinium Research with a sample of 1,505 prospective first time buyers and 505 actual first time buyers between 27 July and 3 August 2017.  The sample was restricted to GB adults who were students or in work.

2 Based on prospective first time buyers’ response to “How much are you aiming to save up for your deposit?”

3Aldermore’s Q1 2017 First Time Buyer Index research was conducted by Opinium Research between 21 to 26 February 2017 amongst 502 actual FTBs. Our sample has been weighted to reflect a nationally representative audience

For further information about Aldermore, please review our Notes to Editors page


For further information, journalists can contact:

Rachael Snelling, Aldermore
Phone:          0208 1853 102
Email:           Rachael.Snelling@aldermore.co.uk

Rozie Green, Lansons
Phone:          0207 566 9724
Email:            rozieg@lansons.com

 

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