07 Nov Why research and planning is key to buying
With an expected rise of 7.2 million renters by 2025 (PwC), the lack of affordable housing in the UK is fuelling the current housing crisis. But it isn’t just affordability that is an issue amongst the latest generations of aspirational home buyers, but a lack of knowledge on the overall process that is also acting as a deterrent.
NatWest’s Home Buying Survey found that a third of the people interviewed wanted to buy a house but don’t think that they could afford to. It’s not as bad as you think though – in fact just educating yourself could save you thousands.
The NatWest’s survey of 2,025 UK residents aged between 20 and 45 shows that over a third of those who don’t own a property today believe they will never be able to afford one; an overwhelming 82 percent of those questioned believe Brexit to be damaging their chances of buying.
However, most striking in the survey is how much FTBs over-estimate certain costs.
On average, those questioned felt a valuation fee would cost £1,446 whereas NatWest says the actual average cost is £250.
Stamp duty is judged to be £3,000 on average whereas it is £1,840; the mortgage arrangement fee is actually £995 on average but FTBs expect it to be £1,815.
Biggest understanding gaps are from first time buyers
First-time buyers were found to have more gaps in their knowledge than homeowners, in particular, those under 25. Almost 45% stated they were unable to explain the elements of buying a house because they had never heard of it, compared with almost 25% of 35-45-year-olds. Elements of the home-buying process which were hardest to explain were mortgage indemnity fees, conveyancing and stamp duty. Mortgage indemnity fees were the hardest for first-time buyers to explain; these fees are essentially just a type of insurance policy which protects the lender if the mortgage repayments cease for any reason. Removals, estate agent fees, and redecorating and maintenance were easier for first-time buyers to explain, which suggest it’s the more complex terms which need explaining to those thinking of buying their first home.
Interestingly, just under a quarter of people interviewed in this survey were aware that stamp duty doesn’t need to be paid if the property is under £125,000. Stamp duty is the tax imposed on legal documents for the transfer of property, as well as other assets.
Conveyancing, survey and mortgage indemnity fees are also sharply overestimated by those questioned.
Although buying a home can be a pricey process, the data suggests that it might not be as much as some potential homeowners think. Could a gloomy attitude be stopping some people from trying to get on the property ladder asks the bank?
Overall, first time buyers overestimated costs by 59 percent which equates to £6,406. With 48 percent of respondents citing financial reasons as the biggest barrier to buying a home, the bank says this amount could seriously change people’s hopes about getting on the property ladder.
Education and planning are key
Totalling all homeowners and non-homeowners in this survey, only 8% felt comfortable explaining all elements of the home buying process. This suggests that if we educate ourselves more on the fundamental details of the home buying process and spend more time speaking to the experts about what these elements really mean, the whole process may seem less scary.
To see a full jargon buster of more elements surrounding the Home Buying Process, see NatWest’s A-Z of buying a home here.
If you’d like to know more about the house buying process, why not call us today on 01325-776424