First-time buyers are being urged not to overlook the extra costs of buying a property – which add more than £2,000 to the cost of homeownership.
Alongside mortgage costs, the average first-time buyer should expect to pay £2,170 in additional expenses during their first year of homeownership, according to research by Aldermore Bank.
This includes costs such as home insurance, unexpected repairs such as fixing a boiler and any decorating or improvement work.
Once average monthly mortgage payments are factored in, the first year of ownership typically adds up to almost £10,000, Aldermore says.
Factored in: Not including mortgage repayments, first time buyers will pay on average £2,170 in additional expenses, according to Aldermore Bank
Jon Cooper, head of mortgages at Aldermore, said: ‘After years of saving for a deposit, first-time buyers may breathe a sigh of relief once they have been handed the keys to their property.
‘Although they will have been focused on the end goal and achieving their dream, it’s important not to overlook the additional financial responsibilities that come with owning a home.
‘So it’s important to budget for these additional expenses.’
Despite the cost of homeownership increasing, particuarly thanks to higher mortgage rates, Aldermore says first-time buyers remain undeterred in their homebuying ambitions.
Its 2,500-strong survey of aspiring homeowners and recent buyers found that the biggest motivation for getting on the ladder was to avoid paying rent.
Nearly two-thirds of prospective first-time buyers said they would be happy to pay the extra costs of owning in return for not paying increasing rents.
The security of owning their own property was also a major draw.
More than three-quarters of actual first-time buyers surveyed said they were happy they are no longer spending money on rent.
Over the past three years alone, the average rent has risen by almost 32 per cent from £974 a month to £1,283, according to the Homelet Rental Index.
| Additional expenses | Average annual cost |
|---|---|
| Ground rent | £291 |
| Work needed on house | £474 |
| Home insurance | £422 |
| Annual building maintenance (e.g. for areas of communal flat) | £300 |
| Annual service charge | £335 |
| Unexcepted repairs (washing machine/boiler break down) | £348 |
| Credit: Aldermore Bank |
Separate research by Moneybox found more than half of aspiring first-time buyers have pushed back their home-buying goals and now plan to buy later than previously hoped.
Two-thirds said the cost of living has impacted their disposable income, making it harder to save a deposit, while just over half are concerned about high interest rates.
Despite this, becoming a homeowner remains a priority for 82 per cent of people, with half saying this financial goal is very important to them.
Brian Byrnes, head of personal finance at Moneybox, said: ‘First-time buyer hopefuls have endured a sustained period of economic and mortgage market uncertainty yet despite this, the desire to own a home has increased significantly and remains their most important financial goal.
‘In fact, so far this year we’ve seen a staggering 42 per cent increase in the number of new customers opening a Lifetime Isa.
‘There can be no doubt it has become increasingly difficult to get on the property ladder in recent years and first-time buyers need more support.
‘We also know that saving a suitable deposit remains one of the biggest hurdles many face on the journey to buying a home.’
On the rise: Higher rents are a key reason many renters want to get on the property ladder
Reality of homeownership is often more expensive
Aldermore’s research highlights how achieving the homeownership dream will come with extra costs many do not factor in.
However in reality, many first-time buyers will pay much more than £10,000 in the first year of homeownership.
The average first-time buyer mortgage amounts to around £200,000, according to financial trade body UK Finance. The average mortgage term they opt for is just over 30 years.
The average five-year fix is currently at 5.65 per cent, according to Moneyfacts. Someone with a £200,000 mortgage being repaid over 30 years on this rate could expect to pay £1,154 a month, or £13,848 a year.
To purchase the property they will also need to pay solicitor’s fees, which are typically around £2,000. They will also likely pay for an independent survey.
Once the property is purchased they will likely need to buy furniture and appliances which could also add up to thousands of pounds.
