New homebuyers spend £11k in first year

In the first year of owning a new home the average new UK homebuyer spends over £11,000 in “getting on the ladder”, setting up home and household running costs, according to new research by GE Money Home Lending, one of the UK’s leading specialist mortgage lenders. These costs are in addition to the expected cost of servicing the mortgage.

However, according to the research, carried out on behalf of GE Money by the Future Foundation, the average prospective homebuyer expects to spend £3,488 more than this on costs such as stamp duty fees, furnishings and appliances, as well as the ongoing essential bills and services.

Getting on the ladder costs

Stamp duty is the biggest setback in terms of ‘getting on the ladder’ costs, setting the average buyer back some £1,200. It is perhaps no surprise that most consumers treat such fees with disdain. Solicitors’ fees are also a major burden and potential borrowers should expect to spend close to £900 thereupon and close to £600 on mortgage arrangement fees and surveys. People tend to over estimate what they are going to spend on such items as stamp duty and fees by over one and a half times.

Moving in and setting up costs

The costs associated with buying one’s first home do not, of course, rest at the house purchase itself. Buyers must also take into account the products and services needed to make the home both a functional and a desirable place in which to live. Although these costs are often ongoing, GE Money’s research suggests that buyers need to find a further £4,721 to cover the cost of moving and equipping the new home (see breakdown below). Again prospective homebuyers overestimate these costs by over £1,300.

Bills and services costs

Mortgage repayments have become a hefty monthly outgoing for home-owners, with the average first time buyer now having to dedicate 22% of their annual income to steadily pay off their mortgage loan. However, first time buyers must also factor into their monthly expenses the cost of running a household, in line with the lifestyle by which they wish to sustain.

The total monthly cost of running a household is £285 with the largest monthly outgoing being council tax followed by utility bills. Together these two costs account for a sizeable 59% of a buyers’ monthly household running costs, with the remainder going towards more lifestyle expenses such as internet access and digital TV. GE Money’s research clearly indicates that the expected costs are more closely aligned to the actual costs, largely because a considerable proportion of first time buyers will have been renting for a period of time before they could afford to buy and as such are familiar with monthly running costs.

Gerry Bell, Head of Mortgage Marketing at GE Money Home Lending, said: “While the price of the property may be the major financial anxiety for buyers, they must also consider other expenses associated with the house purchase.At a time when interest rates have been steadily increasing, allowing oneself a financial buffer has never been as important. It is reassuring to see that despite rising interest rates and general market turbulence, borrowers appear to have such a realistic outlook when it comes to how much their property is going to cost them – not just in terms of mortgage costs, but also in terms of the initial setting up and moving in costs and the ongoing household bills.

“It appears that most prospective potential buyers are prepared for the costs associated with buying a home, as well as those associated with setting up the property and the ongoing running costs. Indeed, our research has found that the average borrower actually overestimates what it will cost in every area of the home purchase. In the current unpredictable environment this is unarguably a good sign.”