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The real cost of being a first-time buyer

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First-time buyers are underestimating the deposit they need by over 30%, with London buyers in particular falling short.

First-time buyers aim to save an average of £34,397, but in fact need a deposit of £49,639, giving them a deficit of 31% or £15,388. With this in mind, deposits remain the number one obstacle for over one in three (34%) first-time buyers.

The problem is particularly acute in London, where homes are more expensive. The average deposit needed is a chunky £123,000, but the average first-time buyer has set aside just £48,000.

Higher deposits also mean that first-time buyers are underestimating how long it will take them to save up. Almost three fifths (58%) believe they will be able to reach this goal within five years but only around half reached the goal in this time.

The government’s English Housing Survey earlier this year found that the average age of a first-time buyer has increased from 30 to 32 over the past 20 years, but people are now far more likely to buy as a couple. The same survey found first-time buyer numbers had dropped from 922,000 annually, to 675,000 over the same period.

Divergence between perception and reality

First-time buyers are also unsure on the ancillary costs associated with home-buying, including solicitor’s fees, stamp duty and removal costs. Around two in five spent more than expected on these extra costs, by an average of £2,334.

Charles McDowell, commercial director, mortgages, at Aldermore, said: “It is clear there is a divergence between perception and reality when it comes to the house buying process…This lack of understanding clearly has financial implications but it can also take its toll emotionally. Our first-time Buyer Index carried out in the second quarter of 2017 revealed nearly one in five (17%) recent first-time buyers took three or more attempts to buy their home and the process of buying a first property caused so much stress that 35% were made ill.”

“Some have suggested the government plans to announce cutting stamp duty for first-time buyers, in the Autumn Budget, a step we would welcome. As it stands, first-time buyers are systematically let down by an overly complex, opaque and costly system.”

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