How the Maths Doesn’t Add Up For Aspiring First-Time Buyers

  • Majority of aspiring first-time buyers expect to spend between £100,000 and £150,000 on their first home (34%) – providing them with a ‘one in 20’ chance (18%) of finding a home within their price bracket.

  • However, most aspiring first time buyers underestimate how much their mortgage repayments will cost a month – with calculations up to 64% wide of the mark – equating to hundreds of pounds a month.

  • 28% of aspiring first time buyers admit to never having thought about how owning a home could help them top up their pension in old age.

The majority of aspiring first-time buyers ‘wildly’ underestimate how much their first home will cost, research by My Home Move, the UK’s leading provider of mover conveyancing services, has found.

A fifth (21%) of aspiring first-time buyers wish to spend up to £100,000 on their first home; while a third (34%) plan to buy a home costing between £100,000 and £150,000. Of those in the lower price range, the majority wish to spend around £350 a month on their mortgage, with those in the £100,000 to £150,000 bracket expecting their mortgage to cost in the region £550 each month.

However, in both instances the aspiring buyers’ maths could leave them thousands of pounds a year worse off. According to My Home Move’s research, a home costing £100,000 commands a mortgage of £450 a month (28% more than expected), while a property worth £150,000 costs £676 a month in repayments, 23% more than the aspiring first time buyer’s calculations, when they purchase with 5% deposit. (See Chart one)

Commenting on these findings Doug Crawford said:

“As we know from our research, the majority of aspiring first time buyers (88%) are currently in rented accommodation, and as such their prime comparison for a mortgage payment is the amount they pay in rent each month. According to industry figures the average rent outside of London and the South East hovers close to £600 a month* – suggesting that most aspiring first time buyers want a like-for-like swap in monthly out goings, or even a saving.”

The only exception comes when a buyer finds a property for £125,000, as their expectations regarding monthly mortgage repayments and the reality aligns at around £550 – however this leaves them with only a 1% chance of finding a home at this price, according to price paid data for 2016 (HMLR).

The financial problems begin to intensify as property prices rise. For example, those looking to spend between £150,000 and £200,000 on a first home would have to pay between £676 and £900 a month in mortgage repayments, to cover the 95% loan-to-value. However despite the increase in property value, most aspiring first time buyers still expect their mortgage to cost around £550 a month;  with only 7% of those surveyed accurately calculating their mortgage repayment.

Continuing Doug Crawford said, “With 10 house-hunters chasing after each available property**, we’d strongly 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.”

My Home Move surveyed 1,000 aspiring first-time buyers across the UK to discover their views on getting on the property ladder, including issues of affordability. When asked if they saw buying a property as part of their future pension, over a quarter (28%) of respondents admitted to never having thought about it before; while nearly 10% expected their pension to be sufficient, without the need to top it up from the sale of their future home.

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