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First time buyers left bamboozled by home buying jargon

POSTED: 4th February 2019
IN: Newsroom
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  • Over half (52%) of prospective first time buyers do not understand what a Help to Buy equity loan is.
  • Over two fifths (47%) do not understand Lifetime ISAs and over a third (36%) struggle with what a Help to Buy: ISA is.
  • This confusion over options has led to nine in 10 (89%) first time buyers thinking it’s difficult to get on the ladder – which has not improved in the past six months.

The latest First Time Buyer Index from specialist bank, Aldermore, has revealed that prospective first time buyers struggle with commonly used housing and mortgage terms, creating challenges when beginning the process of buying their first home. When asked of their comprehension of mortgage terminology, over half (52%) of prospective first time buyers said they do not understand the Help to Buy equity loan very well. This was closely followed by the Lifetime ISA with over two fifths (47%) showing a lack of understanding.

This means many first time buyers could be missing out on much needed assistance to get on the housing ladder, up to £3,000 from the Government through the Help to Buy: ISA scheme or £1,000 a year with a Lifetime ISA. And by not being conscious of the shared ownership option or the Help to Buy equity loan scheme, would-be buyers may not be aware of all the pathways to home ownership open to them, even with small deposits.

This has contributed to nine in 10 (89%) believing it is difficult to get on the ladder – which has not improved in six months2. This has led to nearly two-thirds (65%) of prospective first-time buyers feeling that buying a home is unachievable for them at the moment, and seven in ten (71%) thinking the Government does not do enough to support them.

Terms causing confusion include:

Terms

% of prospective first time buyers who do not understand the term

“First dibs” for homes to Londoners

61%

Starter Home Initiative

59%

Help to Buy equity loan

52%

Lifetime ISA

47%

Help to Buy: ISA

36%

Shared Ownership

35%

First-time buyers say process is confusing

This lack of understanding was a theme among first time buyers, who had bought within the past three years, also with over half (57%) saying the house buying process was confusing. Reinforcing this when asked what was the hardest part of the process, other than raising a deposit (10%), first time buyers said that the procedural processes were the most challenging, with legal jargon (9%), the length of the purchasing process (9%), the length of the mortgage process (9%) and the admin involved (8%) of particular difficulty.

However, there is light at the end of the tunnel with seven in ten (71%) saying the stress of the process was worth it and eight in ten (82%) were happy with the mortgage deal they got.

Costly missed chances

The difficulty of the process is hurting prospective buyers’ wallets also. Of first-time buyers that bought in the past 3 years, a third (33%) had a property sale fall through costing an average of £1,545 spent in fees, this rises to £1,814 for those that bought their first home in the last six months. This led to over half (52%) of first-time buyers stating they spent more than they intended.

Chart one: Of the first time buyers that had a buying attempt fall through, the amount spent before the sale fell through?

Commenting on the findings, Damian Thompson, Director of Mortgages, Aldermore said: “Buying a first home is a challenging process and it is being made harder as future buyers clearly do not feel they are being informed enough about the options open to them.  Collectively as an industry, we need to do a better job with educating prospective buyers to ensure they are knowledgeable of the products and initiatives available so they are not missing out. This will help ease the stress and anxiety of what should be an enjoyable and exciting time in their lives.”

“At Aldermore, we understand getting on the property ladder is no easy feat. Our human approach to lending enables us to provide a straight-forward process that explores all options open to borrowers and guides people through the process from beginning through to completion.”

ENDS

1The figures are sourced from a nationally representative survey conducted by Opinium Research between 5-14 November 2018 with a sample of 1,501 prospective first time buyers and 502 actual first time buyers. The sample was restricted to GB adults who were students or in work.

2The comparison figures from H1 2018 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 4-15 May 2018. The sample was restricted to GB adults who were students or in work.

Notes to editors

For further information, journalists can contact:                                                 

Gareth Hill, Aldermore
Mobile:            07721 127514     
Email:             gareth.hill@aldermore.co.uk  

Lansons
Phone:          0207 294 3626
Email:            Aldermoreb2c@lansons.com

Follow us on Twitter: @AldermoreNews

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

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