Barratt Homes: First time buyer budgets do not cover homebuying fee and costs

Here’s why

According to a new survey half of first time buyers are not budgeting enough for the cost of buying their first home, with the likes of surveys, valuations and legal fees costing 73 per cent more than anticipated.

The survey of first time homebuyers in the past five years, undertaken by homebuilder Barratt Homes, shows that over half of first time buyers are spending nearly £5,000 on the fees and costs involved in buying their first home.

Half of all first-time buyers are spending £2,000 more than budgeted for when it comes to the fees and costs associated with buying a home.

The £4,955 figure comes in at more than £2,000 over an average budget of £2,865 for first time buyers, which only 28 per cent of buyers claim to meet.

“We carried out this research to identify how first-time buyers could benefit from more accessible advice and knowledge” a Barratt spokesperson said. “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.” The homebuilders’ new online guide aims to make buyers more aware of the fees and costs that might not appear front and centre, and providing a truer idea of value to the ones that do.

Of those affecting buyers, valuation fees, survey fees and arrangement fees were the costs most often forgotten about by first timers, with 18 per cent of respondents admitting to having been unaware of each.

Stamp Duty and broker fees were amongst the most commonly undervalued costs. Stamp Duty was found to be almost £700 more than expected, while broker fees were more than £630 extra. Overall, first time buyers were found to be undervaluing specific costs by an average of £605.

In the past five years, over 30 per cent of first time buyers have looked to The Bank of Mum and Dad to cover these additional costs, but that has grown from 24 per cent five years ago to 40 per cent of buyers in the last year.

For some, budgeting for fees isn’t proving an issue – one in five are actually saving money, budgeting more than they need by an average of just over £1,200. This is in line with the sense that some first-time buyers can afford the extra costs, but lack the knowledge of where their money is most needed. Over the five-year period, 59 per cent have used existing savings to cover these additional costs, indicative of a first-time buyer with available savings, but without an understanding of what they need to cover.  

Barratt said: “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. However, where people are able to seek out and receive expert advice, not only are their budgets helping them plan better, but almost a quarter of people are making substantial savings as a result.”

In hindsight, more than 55 per cent said they would definitely have benefitted from additional advice related to the costs. Had they known the exact fees upfront, most buyers (47 per cent) said they would’ve saved more, while 19 per cent would’ve purchased a smaller or newer home, which typically attract lesser costs.

Barratt added: “It’s encouraging to see younger first time buyers seeking out advice beforehand and benefitting from it. As homebuilders, we must continue to provide the best possible advice on what to expect when buying a home, as well as promote initiatives such as Help to Buy to continue encouraging buyers onto the property ladder.”

To help buyers make a more-informed decision, Barratt’s new online guide to buying costs can be found here  https://www.barratthomes.co.uk/buying-a-home-the-costs.