First time buyers need to raise an extra £23,000 to buy first home due to ongoing impact of Covid-19

POSTED: 29th November 2021
IN: Newsroom
  • Nearly three in five (58%) first time buyers in the UK that bought since March 2020 had to raise a larger deposit than intended due the ongoing impact of Covid-19
  • Half (49%) experienced a house purchase fall through, costing on average £2,403
  • Additional fees and delays involved with buying a home cost first time buyers an average of £4,486
  • Over half (52%) had to leave their house empty for a few months because they couldn’t afford furniture

Aldermore bank’s latest First Time Buyer Index1, a survey of 2,015 prospective and 500 actual first time buyers, reveals that first time buyers that have bought their home in the 18 month period since March 2020 have experienced an increasingly expensive process, stretching them to raise additional tens of thousands in funds.

Raising a deposit

Over half (58%) of first time buyers needed to raise a larger deposit than initially intended, due to the impact of Covid-19 pandemic. The average increase was an additional £22,849, bringing the deposit size up to £62,572 (an average of 18.6% of the property value). It took first time buyers who bought since the beginning of the pandemic an average of nearly five years (4.6 years) to save up enough.

A lengthening and more frustrating process

The process of buying has become more complicated during the 18 month period after the pandemic began with delays and false starts increasing the challenges and expense. Even having an offer accepted took multiple attempts for many; two in five (40%) took two or more offers to secure the home they bought stretching out the process and raising costs. And prior to that, half (49%) were in the process of buying a different property only to have it fall through. This cost new buyers an average of £2,403, with one in nine (12%) spending £4,000 or more.

Increased challenges and delays meant first time buyers say they were delayed by an average of 3 months, with one in six (16%) being delayed by over five months or more.

These extra barriers and costs meant that nearly half (48%) felt they did not get the home they wanted because they had to compromise so much to get on the housing ladder. Meanwhile, the financial impact forced over half (52%) to leave their house empty for a few months because they were unable to afford furniture immediately. The stress of the house buying process also affected people’s personal lives, with nearly half (46%) saying that the process caused issues in their relationship.

Additional costs

Excluding raising of the deposit, often overlooked are the other costs associated with purchasing a property, including solicitor and moving fees. These extra fees set the average first time buyer back a total of £4,486.

Additional costs of buying a home

Average per first time buyer

Solicitor fees

£767

Mortgage fess

£611

Conveyancing fees/ valuation

£577

Moving fees i.e. van hire, moving company hire

£477

Rent paid due to delays in moving into your home

£528

Estate agent fees

£544

Other

£521


Jon Cooper, head of mortgage distribution at Aldermore said:
“Becoming a home owner is a wonderful step forward in a person’s life but our research shows the persistent effects of the pandemic are causing high levels of financial challenges in the journey. While costs and complicated processes may feel daunting, we’ve found first time buyers are glad they did it, with 78% saying the stress was worth it to find a home. I would advise would-be buyers to plan carefully to ensure they are prepared for the range of costs involved and to seek a broker who can be a great help in cutting through the jargon and guiding you through the process.”


Aldermore’s Top Tips for saving for a deposit:

At Aldermore, we know the difficulties first time buyers face in raising a deposit, so we have complied our top tips to help those looking to achieve their homebuying dreams.

  1. Don’t just put aside loose change, try and save a set amount each month – Rather than putting aside only the money you have left over at the end of the month, try to save a set amount regularly and consistently, ideally at the beginning of the month. It’s also worth looking at the typical property prices in the areas you’re interested in buying. This will help give you an idea of how much of a deposit you’ll need to save and estimate a timeline to reach this goal.
  2. Shop around for savings products – The big high street banks can often offer low rates for building savings funds; ensure you shop around for the best rates and products that suit your home buying timeline. While small differences in rates may seem slight, the differences can snowball through compound interest and really add up over time, making it easier to reach your goal.
  3. Assess your living situation – Renting can take a big chunk of your monthly income. If you live alone, consider renting with friends or living in a house-share as this will typically be cheaper than renting a one bedroom property. It will also help reduce monthly utility bills, in turn helping you to save more each month. For those who are able to move in with parents or family temporarily, this could be another alternative to renting altogether.
  4. Take advantage of help for first time buyers – The difficulty faced by first time buyers attempting to get their foot on the housing ladder is widely recognised. Over the past few years, various Government schemes have been introduced to help first time buyers achieve their homebuying goals. For example, if you’re open to purchasing a new build property, consider utilising the Government’s Help to Buy Equity Loan Scheme ahead of the deadline in March 2023.
  5. Cut down on unnecessary spending – We all deserve a treat now and again, but unnecessary spending habits may be sabotaging your savings. Small changes over time, such as making your own lunch a few days a week, can add up over time. It’s also worth reviewing your direct debits and bank statements to identify any automated payments you may have signed up for, which you do not make use of anymore.
  6. Review your savings habits regularly – If you’re having difficulty meeting your target amount, reduce your monthly contributions to make it more manageable. If you receive a pay rise, a financial gift or find your monthly outgoings are reduced, consider increasing these contributions to reach your homebuying goal sooner.

 

-ENDS-

Notes to editors:

1Research conducted, on behalf of Aldermore bank, by Opinium in September 2021, with a nationally representative sample size of 2,015 Prospective First-Time Buyers and 500 actual first time buyers, that purchased a home from March 2020.

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

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