Going overboard: half of first time buyers are blowing their budget

The average price of a first time buy property in London is �475,000, with first timers spending �60

The average price of a first time buy property in London is �475,000, with first timers spending �600 over budget on costs and fees - Credit: Getty Images/iStockphoto

First time buyers spend 73 per cent more than planned on fees and costs when buying their first home, and mum and dad have to pick up the slack

You’ve sorted out your mortgage, got your deposit down and the keys are in your hand, but have you got an extra £605 in your bank to spend on those nifty costs that slipped your mind? According to research conducted by Barratt Homes, first time buyers end up spending over £600, or 73 per cent, more than anticipated on buying their first home thanks to forgotten fees and costs.

On average, 18 per cent forgot about the associated fees of buying a home. Half of all first time buyers ended up spending over £2,000 more than their average budget of just over £2,865.

Only 28 per cent of first timers said they had met their budget, with the rest spending just shy of £5,000 on buying their first home. Thankfully, one in five manages to save £1,200 by staying on top of their finances.

Unsurprisingly, it’s the Bank of Mum and Dad that picks up the costs for a third of those left out of pocket. Whilst five years ago 24 per cent of first time buyers looked to their parents, this figure has risen to one in four as the cost of a deposit in London in particular has soared. Since 2012, more than 30 per cent have been forced to turn to their parents’ for help.

The report illuminates the fact that first time buyers are unaware of the additional costs associated with buying a home, with 59 per cent turning to savings to cover the costs. With over half admitting they would have benefitted from better advice, a Barratt spokesperson added: “The results of this research clearly show buyers are struggling to understand not only how much they need to budget, but also what that budget should be covering.”

Broker fees and Stamp Duty were most commonly underestimated, costing £630 and £700 more than anticipated respectively. 18 per cent of respondents were oblivious to the costs of valuation, survey and arrangement fees. Just under half said they would have saved more money had they known of the costs, and 19 per cent would have plumped for a newer or smaller home.

According to Halifax, a typical first time buyer deposit in the capital will rack up a cost of £106,577, having quadrupled in the last decade to over three times the average paid in the rest of the country. A mortgage will cost young buyers in London £303,218 whilst the average first time buyer home has risen 66 per cent in the last five years to £409,975. Camden is the fourth most unaffordable borough for those getting on the ladder, with average house prices costing 11.8 times average earnings in the area.

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With first time buyers currently revving the motor of the property market and outperforming the rest of the market by 42 per cent, Barratt is taking steps to ensure that the associated costs of buying a home are made more transparent, especially considering the longer length of mortgage terms as standard which tie first time buyers up for longer.

To alleviate some of those fears, Barratt London is hosting an event tomorrow evening. The programme features talks from independent mortgage advisor Kate Faulkner, question and answer sessions and a Homebuyers Clinic. Those who reserve at the event can take advantage of Barratt’s early incentive offer that could save buyers up to £3,000.

Barratt have also launched a ‘guide to buying costs’, which you can find here for more advice on how to budget. “To those looking to buy their first home, £2,000 can be a large amount of money, which is why we have launched our latest online guide, part of our ongoing commitment to help buyers budget better,” added a Barratt spokesperson.

Barratt London’s Help for Homebuyers event takes place at 8 Northumberland Hotel, Westminster, WC2N 5BY, on Thursday July 27th between 12 and 8pm. Find out more and book here.