The majority of aspiring first-time buyers ‘wildly’ underestimate how much their first home will cost, according to new research* (*Source: My Home Move, May 2017).
The research, which was conducted amongst 1,000 aspiring first-time buyers across the UK, found on average a mortgage on a property could cost up to 64% more than anticipated.
Assuming a mortgage deposit of 5% and rate of 3%, the research looked at different price brackets how much first time buyers can expect to spend on monthly repayments.
Of those looking to spend up to £100,000 on their property, the majority wished to spend around £350 a month, while those in the £100,000 to £150,000 bracket expected their mortgage to cost in the region £550 each month.
However, a home costing £100,000 would command a mortgage of £450 a month, 28% more than expected, based on the borrower scenario above. A property worth £150,000 costs £676 a month in repayments, 23% more than the aspiring first time buyer’s calculations. Those looking at a £200,000 property were 64% out, after expecting to have monthly repayments of £550, when in reality based on the 3% rate, it would be £901. There was also a 50% difference for those looking at homes worth £250,000, with buyers hoping for £750 a month, but the reality being £1,126.
Martin Gibbon, a Fellow of the National Association of Estate Agents and Group Director of Balgores Property Group comments: “Mortgages are cheaper than they’ve ever been, but first time buyers still need to ensure they can afford to borrow the amount they want. It’s
vital they do the sums to ensure they can make the monthly mortgage payments. Very often, mortgage payments will be less than the rent they might be paying, but there are additional costs like buildings insurance and repairs/maintenance to take into account.
Alun Farley, Manager at the Mortgage Advice Bureau Essex commented: “We provide all first time buyers with an overall picture of the costs associated with buying their first home. At the moment, there are many attractive mortgages on the market and first time buyers need to ensure they do their research to get the best deal. It is advisable for first time buyers to consult an independent mortgage broker, who can give them a selection of mortgages to consider, with favourable terms. We have access to 90 lenders offering 11,000 mortgage products.”