First-time buyers ‘wildly’ under-estimating costs of purchase

The majority of aspiring first-time buyers ‘wildly’ underestimate how much their first home will cost, according to research by My Home Move.

The conveyancer surveyed 1,000 aspiring first-time buyers across the UK and 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%, My Home Move asked buyers in different price brackets how much they 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, according to My Home Move’s research, 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.

Doug Crawford, chief executive of My Home Move, said: “With around 10 house-hunters chasing after each available property, we would recommend aspiring first time buyers check their figures and have their mortgage agreed in principle as soon as possible.

“This will enable them the very best chance possible of securing their first home, putting them one step ahead of other speculative house-hunters.”

* The Council of Mortgage Lenders (CML) has estimated that gross mortgage lending reached £18.4bn in April, down 11% on March but 4% higher year-on-year.

The trade body’s senior economist Mohammad Jamei said: “First-time buyers and remortgage customers appear to be buoying the market, as low mortgage rates are encouraging borrowers to remortgage and attractive government schemes are helping first-time buyers. We expect this trend to continue over the coming months.

“Home movers are having less luck. Their activity has been subdued for some time now and the low number of movers means fewer properties for sale.

“This supply and demand imbalance will continue to underpin house price values, even as the rate of price rises slows.”


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