First Time Buyers and mortgages - new study shows the help they get

A high proportion of first time buyers take advantage of some form of assistance when purchasing their initial home.

That’s the verdict of Uswitch Mortgages’ survey into purchase trends amongst first-time buyers.

This revealed that 45 per cent secured assistance from a government scheme - the most popular was First Homes (36 per cent) followed by a Lifetime ISA (29 per cent).

“When people think about first-time buyer schemes, their mind often jumps to Help to Buy. However, the Help to Buy equity loan scheme is no longer available in England, Northern Ireland or Scotland, although those in Wales who are eligible can still apply. For English homebuyers, one of the alternatives is the First Homes scheme, which was the most popular amongst survey respondents” explains Kellie Steed, Uswitch’s mortgage expert.

“Offering a 30 to 50 per cent discount on the market value of a property may help those struggling to make that leap onto the property ladder due to affordability. However, there are limitations on the type of properties you can purchase, and certain eligibility criteria apply.”

The second most common purchase method was buying with a traditional’ mortgage - 44 per cent of first time buyers took this route with standard variable rate mortgages slightly more popular than a fixed rate.

Some 34 per cent of first-time buyers got help from their parents to get on the property ladder, with 24 per cent getting a loan from their parents for the deposit, and 10 per cent receiving financial gifts from the family. 

The survey shows 48 per cent of FTBs are sole owners while 33 per cent buy with a partner.

“It can be easy for first-time buyers to only focus on rates when looking at mortgage deals. While the rate is really important in working out how expensive your repayments will be each month, buyers should also consider the fees involved. A mortgage deal with a low headline rate can sometimes wind up being more expensive than higher-rate deals due to fees” says Steed.                

“On average, the arrangement fee alone sets a first-time buyer back around £345. But this is an average figure - in reality, some first-time buyers may pay nothing while some may face a cost of over £2,000. That’s why it’s so important for prospective homeowners to be aware of the fees associated with a mortgage. It’s a similar situation for legal fees, with the range paid varying from £0 to £600, with an average of £89.”

Reflecting many similar surveys in the past, this one from Uswitch finds many first time buyers unaware of the true costs of purchasing a home.

Just seven per cent knew of mortgage arrangement fees and a remarkable 79 per cent were unaware of stamp duty costs - perhaps because, for the moment at least, first-time buyer stamp duty relief in England and Northern Ireland means that if you’re buying up to £425,000, you are exempted from SDLT. 

Around half were unaware of survey costs while just 40 per cent knew of conveyancing charges.