Research shows what buyers are cutting back on and the average cost of owning a home
According to two new studies, homebuyers across England are having to cut back for years in order to get on the property ladder as the average buyer is now paying almost £76,000 during the initial year following a home purchase.
A study by Rightmove has revealed that first-time buyers are cutting back on spending in order to afford a deposit on their first home. Research shows the most common ways they are saving money, such as, reducing spending on going out (72%), using less gas and electricity at home (55%), spending less on holidays (49%), cutting the amount they spend on a food shop (48%) and cancelling subscription services such as Netflix and Amazon Prime (35%).
Further emphasizing the importance of saving as much as possible, only 16% of aspiring first-time buyers said all or part of their deposit would be raised by getting a loan or a gift from friends and family.
The study also found that on average, it is taking a first-time buyer five years to save up their deposit. Meanwhile, the average monthly mortgage payment for a new first-time buyer taking out a two-year fixed mortgage at 90% Loan-to-Value (LTV) is now £1,324, 41% higher than the average monthly rental payment of £940 following mortgage interest rate rises.
This follows findings by GetAgent.co.uk which found that the average homebuyer across England is now paying almost £76,000 during the initial year following a property purchase, although this cost climbs as high as £209,329 in some areas of the market.
GetAgent analysed the current cost of homeownership, not only taking into account the initial hurdle of a mortgage deposit, but also the additional cost of stamp duty, monthly mortgage repayments, annual utility costs and the average annual maintenance costs of owning a home.
Their research shows that across England as a whole, the current average cost of a home is £315,965, meaning that the current cost of placing a 15% mortgage deposit is £47,395. In addition to the mortgage deposit, the average stamp duty bill is also at £3,298.
The research also showed the ongoing costs of homeownership, with the average annual cost of maintaining a home costing £3,160 per year, the average annual cost of repaying a mortgage totalling £19,029 per year and the average cost of basic utilities such as gas, water and electric coming in at £2,919 per year.
As a result, the total cost of homeownership in the initial year following a property purchase, according to GetAgent, is £75,801.
Priorities of first-time buyers
The study by Rightmove also looked at what is most important to first-time buyers when purchasing their first home. A three-bedroom semi-detached house is the most popular property type that first-time buyers are hoping to buy outside of London, while London first-time buyers have their sights set on a two-bedroom flat.
Though first-time buyers and more experienced buyers value similar features in a home, first-time buyers placed more emphasis on energy costs, a spare room and space to work from home. Experienced buyers prioritised a garden more than first-time buyers, as well as a parking space and garage.
Demand in the first-time buyer sector is down 26% compared to the frenetic market of last year. However, this also means that despite the many economic challenges, first-time buyer demand is still three-quarters of last year’s level in what was an exceptional market. First-time buyer demand is still 4% higher than 2019.
Tim Bannister, Rightmove’s property expert, commented:
“The sudden nature of mortgage interest rate increases has meant that first-time buyers have had to very quickly reassess their position. For example, those who already had a mortgage offer in place are trying to rush through their purchase to keep their lower rate. Many of those who had not yet secured an offer and found that the monthly repayments they would pay on a mortgage were a lot more expensive than planned, either had to budget for the extra costs, look for a cheaper property and borrow less, or pause their plans altogether.
Now that mortgage rates have started to settle down, first-time buyers will be hoping that there are no surprises in today’s Autumn budget, and they can begin to get some longer-term assurance and financial certainty after what has been a turbulent and very uncertain two months.
Despite the many significant challenges facing first-time buyers at the moment, the fact that demand in the sector is still above the last normal market of 2019 shows that there are many motivated first-time buyers right now who are still determined to get onto the ladder. For those without their deposit saved yet, the results of our first-time buyer study indicate that buying a first home remains very important to people. They are not being put off saving due to the current economic climate, and instead are making decisions in order to save as much as they can towards a deposit.”
Colby Short, CEO and co-founder of GetAgent.co.uk, commented:
“The high cost of homeownership is certainly nothing new but many homebuyers may be surprised at just how much a property will set them back during their initial year of homeownership.
A mortgage deposit remains by far the highest cost associated with a property purchase and the additional running costs such as utilities and maintenance can often be an afterthought. However, when you do take them into consideration, it gives you a far clearer picture of the financial commitment you are making and this is extremely important, particularly in the current market,
Many buyers are now feeling the squeeze where the cost of repaying their mortgage is concerned. When you also add the fact that running costs such as utility bills have also spiralled, those who have overstretched when borrowing are now in a very difficult spot.
So having a very clear view of both the immediate and ongoing costs of a property will safeguard you for times of economic instability and financial difficulty.”
