The homebuying process and its associated costs is being met with a lack of understanding amongst potential first-time buyers, fresh research from Aldermore suggests.
Aldermore’s Q3 2017 First Time Buyer Index shows prospective buyers are underestimating how much they require for a deposit, aiming to save an average of £34,497.
According to the ONS, the average deposit needed is £49,639, meaning a deposit shortage of 31% for many first-time buyers, equivalent to £15,388.
London showed the biggest discrepancy, with first-time buyers aiming to save an average of £48,000 for buying in the capital. According to official figures, the average deposit is £123,000, leaving them £75,000 short.
Charles McDowell, commercial director of mortgages at Aldermore, said the division of perception and reality in regards to the homebuying process is very clear. Potential buyers are underestimating the associated costs when buying as well as the time it could take to complete.
In fact, 58% of first-time buyers believe they will be able to reach their goal within five years, with only half of recent first-time buyers being able to do so. Meanwhile, 16% of first-time buyers took over eight years to reach their goal.
“This lack of understanding clearly has financial implications but it can also take its toll emotionally,” McDowell said. “Our Index revealed nearly one in five recent first-time buyers took three or more attempts to buy their first home and the process of buying a property caused so much stress over one in three were made ill.”
The additional costs related to buying a home – solicitors fees, conveyancing and stamp duty – were unknown to 32% of prospective buyers. Two in five (40%) of those who managed to get on the property ladder spent more an average of £2,334 of extra costs.
What’s more, 47% of first-time buyers who bought a property this year experienced the collapse of a property purchase, with a cost of £1,305, and 26% of buyers experienced this over the last three years.
McDowell believes that first-time buyers are constantly battling an overly complex, ‘opaque’ and costly system. “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,” he said.