overpay mortgage arrears

First-time buyers pushed back towards renting as costs rise

While rising house prices are one thing, the initial costs that must be forked out within the first year of homeownership are now soaring for first-time buyers.

First-time buyers were the biggest beneficiaries of the stamp duty changes back in September, which saw the nil-rate threshold raised to £425,000. Yet as the cost of everything else continues to creep up, this change might not be enough to persuade many prospective homeowners onto the property ladder.

Rising mortgage costs, large deposits, utility bills and annual maintenance are all putting a dampener on first-time purchase plans, and new research has revealed the true cost of property ownership in that first year.

GetAgent.co.uk has found that the total cost of the initial year of homeownership is £75,801, which is a colossal figure for first-time buyers to factor in. As such, it seems, the rental sector will continue to be a crucial factor in housing people until they have the funds to buy.

How are the costs broken down?

The research breaks down the total outgoings of first-time buyers by looking at all of the one-off or annual costs that must be considered when buying a home.

With the average property in England currently costing £315,965 by their data, a 15% mortgage deposit on such a home would set the buyer back by £47,395.

As mentioned, stamp duty for first-time buyers only kicks in for properties priced above £425,000, but for those who do need to pay it, GetAgent.co.uk estimates that the average amount paid is £3,298.

It marks out the average cost of maintaining a property – regardless of whether you are a first-time buyer or another homeowner type – at £3,160 per year. Mortgage repayments then come in at an average £19,029 per year, while gas, water and electric was £2,919 per year when this study was conducted.

Unsurprisingly, the cost of the first year on the property ladder is significantly higher in London – at an average of £139,787 in that first year. Other parts of the south east also came in high on the list, while County Durham was the cheapest area to buy.

A huge financial commitment

Colby Short, CEO and co-founder of GetAgent.co.uk, said: “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.

First-time buyers may need to rent for longer

According to Rightmove research, there has been an ‘exodus’ of first-time buyers in the market over the past couple of months, as people react not only to political announcements but to the rising cost of living and mortgage rates.

Tim Bannister, Rightmove’s director of property science, said: “Though many are getting on with moves, especially those with a purchase already agreed, understandably there are people who are pausing for thought.

“There’s a group who are ready and able to move and are waiting on the sidelines for more financial certainty. Then there’s a group of first-time buyers or people hoping to trade up who were already stretching themselves financially and may now have had their plans dashed.”

It is inevitable that huge numbers of these would-be buyers will put pressure on demand in the private rented sector, with some moving into it for the first time while others make longer-term commitments to rent.

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