Jargon confuses first-time buyers: what schemes are out there?
This complicates the process for young people as they try to take their first step on the property ladder and means they could be missing out on the very initiatives that are designed to make the market more accessible to them.
Help to Buy confusion
The data, which comes from Aldermore’s latest First Time Buyer Index, shows that more than 52% of prospective first-time buyers struggle to understand the Help to Buy equity loan.
Just under half, meanwhile, can’t make sense of the Lifetime ISA and almost 60% are mystified by the Starter Home Initiative. The figures are lower for shared ownership (35%) and the Help to Buy ISA (36%), but still make alarming reading.
Young people who bought homes in the past three years said they struggled to understand the terminology surrounding the process. Asked what was the hardest part of buying their first home, other than raising a deposit (10%), first-time buyers pointed to the procedural processes.
Legal jargon (9%), the length of the purchasing process (9%), the length of the mortgage process (9%) and admin (8%) caused particular difficulty.
On the upside, 71% of first-time buyers said going through the process was worth it, while 82% were happy with their mortgage deal.
Complicated process costs
But the complications involved in house-buying are costing first time buyers, with 52% saying they spent more than they intended.
One third of those who bought in the past three years had a property sale fall through, costing them on average £1,545 in fees. Among those who bought in the past six months, the figure rises to £1,814.
Damian Thompson, director of mortgages at Aldermore, said: “Buying a first home is a challenging process and it is being made harder as future buyers clearly do not feel they are being informed enough about the options open to them.
“Collectively as an industry, we need to do a better job with educating prospective buyers to ensure they are knowledgeable of the products and initiatives available so they are not missing out.
“This will help ease the stress and anxiety of what should be an enjoyable and exciting time in their lives.”
Help to Buy equity loan – the government lends you up to 20% of the cost of a new build home, so you’ll only need a 5% cash deposit and a 75% mortgage to make up the rest.
Lifetime ISA – this product lets anyone under 40 save for a first home worth up to £450,000 or for retirement. You can save up to £4,000 a year and the government will give you a 25% bonus.
Help to Buy ISA – this product lets first-time buyers save up to £200 a month (£1,200 in the first month) and receive a government bonus of 25%. They are only available to open until 30 November 2019.
Starter Home Initiative – this scheme hasn’t launched yet, but when it does first-time buyers will be able to buy a new-build home worth £250,000 outside London and £450,000 inside London with a 20% discount.