First-time buyers underestimate upfront cost of buying

9 Aug, 2018

08 Aug 2018 First-time buyers in just two regions of the UK intend to save enough money to get on the property ladder, with the rest underestimating the amount they are likely to need, according to new research.

The latest First-Time Buyers report from Yorkshire Building Society shows not being able to save enough money for a deposit is the main barrier to owning a home for more than a quarter of would-be buyers across the UK (28%), but the difference in amount buyers intend to save and might require varies significantly by region.

Based on average house prices for first-time buyers, and the corresponding average loan-to-value (LTV) required in nine regions of the UK last year[i], data analysed by the mutual reveals aspiring homeowners may be underestimating their upfront purchase budget by thousands of pounds.

London reveals the largest gap between intentions to save and the reality of purchasing a property, with almost £70,000 unaccounted for by potential first-time buyers currently saving for their first property. First-time homeowners paid on average nearly £415,000 in the area last year with an average deposit of £118,531, but the research shows potential first-time buyers intend to save less than half of this at £49,000.

Would-be homeowners in the South East may not be saving enough either, with an average first-time buyer house price of £276,930 and an average 22% deposit put down in the region, potential homeowners are likely to need nearly £61,000 to get on to the property ladder. However, the Yorkshire’s research highlights potential first-time buyers in the South East intend to save just under £43,000 to purchase a property creating a shortfall of over £18,000.

In contrast, first-time buyers in Yorkshire and the Humber and Scotland may be overestimating the upfront costs of buying their first property. For instance, market data suggests first-time buyers in Scotland paid £137,714 and put down a £24,000 deposit, nearly £1,500 less than current would-be homeowners in the region are intending to save.

Chris Irwin, from Yorkshire Building Society, said: “While our research indicates first-time buyers in the majority of regions across the UK could do more to manage their financial expectations of buying a house, it serves as a reminder to potential homeowners of the importance of budgeting.

“I’d encourage anyone with a dream of home ownership to really take time upfront to do the maths and work out how much they will realistically need to take that first step on the property ladder, including any up-front fees on top of a deposit.

“When you’ve got a more realistic figure, it’s easier then to review your savings habits and work out what you’re able to save and over what period of time, to achieve your required goal. Breaking it down in this way, early on in the home-buying journey could really help first-time buyers.”