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14% of first-time buyers pause plans as they factor in additional costs

Monday, July 10, 2023
  • 24% of homeowners said they hadn’t realised that they may have to pay stamp duty before buying their first home
  • 21% said they didn’t consider stamp duty costs in their budgets
  • 14% of those that did not factor in additional costs put their homeownership goals on pause while they reassessed their affordability

A lack of awareness over additional costs and fees associated with buying a property is leading to some prospective homebuyers being ill prepared to buy. New research from The Mortgage Lender (TML), found that 24% of UK homeowners didn’t realise that they may have to pay stamp duty before buying their first home, with a further 21% saying they didn’t consider these costs in their budget.

Other payments that homeowners revealed they didn’t factor into their budget when buying their first home include solicitor’s fees, valuation fees, surveyor’s fees, and the cost of a homebuyer survey.

Worryingly, a number of homeowners revealed they weren’t even aware that costs such as electronic transfer fees, indemnity insurance, and mortgage advice fees even existed.

List of expenses first time buyers didn’t factor into their budget or were not aware of:

Cost

Didn’t factor it into budget

Wasn’t aware of this cost

Stamp Duty

21%

24%

Legal/ Solicitor’s fees

15%

11%

Valuation fee

21%

23%

Surveyor’s fee

19%

15%

Electronic Transfer fee

30%

35%

Homebuyer survey

21%

24%

Mortgage product fees

20%

22%

Mortgage Advice fees

23%

34%

Indemnity insurance

28%

37%

Land Transaction Tax (Wales)

29%

24%

Land Transaction Tax (Scotland)

20%

37%

Buying a home is one of the biggest financial commitments an individual can make, and while many understand they will need a deposit to purchase their first home, the research highlights that many people hit financial hurdles later on in the home buying process by not factoring in other expenses that could prove costly.

Indeed, 14% of those who did not factor in additional costs said they had to put their homeownership plans on hold while they reassessed their budgets. A further 14% revealed they had to borrow money from their parents or grandparents to cover the extra costs, while 11% took out a loan. 11% said they had to look for a cheaper property and 7% stopped their property search completely as their affordability became too stretched.

Steve Griffiths, Chief Commercial Officer at TML comments “Buying your first property is a big life milestone as well as a huge financial commitment. In addition to securing a mortgage and getting a deposit ready, there are an array of other associated costs involved with getting on the property ladder. But all too often these are either forgotten about or not factored into budgets, meaning many are hit with a financial shock when presented with the additional fees and charges they need to pay.

“What is clear is that there is evidently a knowledge gap when it comes to what’s involved with buying a house, with many learning the hard way when they’re either on or have already been through the home buying process. More than ever, this highlights the need for professional advice. Brokers are not only expertly equipped to support their clients in getting the best mortgage deal for them, but can also ensure that buyers are well prepared in knowing what their affordability is and understanding what other costs may come their way.”

The Mortgage Lender surveyed 2,005 nationally representative UK adults via Opinium between the 19th May 2023 to 22nd May 2023.