A Foot In The Door: How First-Time Buyers Are Navigating the Housing Market

Amid a cost of living crisis, getting on the property ladder can be financially daunting. Uswitch Mortgages recently carried out a survey to examine purchasing patterns among first-time buyers to determine how they afford their homes.

The Most Common First-Time Buyer Purchase Methods

The Uswitch survey showed that nearly half of first-time buyers bought their property with assistance from a government scheme. The First Homes scheme was the most commonly used (36%), followed by a Lifetime ISA (29%).

“When people think about first-time buyer schemes, their mind often jumps to Help to Buy," said Kellie Steed, Uswitch mortgage expert.

"However, the Help to Buy equity loan scheme is no longer available in England, Northern Ireland or Scotland, although those in Wales who are eligible can still apply.

“For homebuyers in England, one of the alternatives is the First Homes scheme, which was the most popular amongst survey respondents. Offering a 30 to 50% discount on the market value of a property may help those struggling to make that leap onto the property ladder due to affordability. However, there are limitations on the type of properties you can purchase, and certain eligibility criteria apply.”

The second most frequently used method of purchasing was through the use of a 'traditional' mortgage, accounting for 44%. A majority of first-time homebuyers chose either a standard variable-rate mortgage or a fixed-rate mortgage when buying a house with a mortgage.

Around a third of first-time buyers received assistance from their parents to enter the property market, with 24% obtaining a loan from their parents for the deposit, and 10% of buyers' parents providing them with financial gifts for their purchase. Regarding ownership, the survey also indicated that nearly half of first-time buyers are the sole property owners, while 33% purchased with a partner.

Additional Costs for First-Time Buyers

Kellie Steed continued, “It can be easy for first-time buyers to only focus on rates when looking at mortgage deals. While the rate is really important in working out how expensive your repayments will be each month, buyers should also consider the fees involved. A mortgage deal with a low headline rate can sometimes wind up being more expensive than higher-rate deals due to fees.

“On average, the arrangement fee sets a first-time buyer back around £345.¹ But this is an average figure - in reality, some first-time buyers may pay nothing while some may face a cost of over £2,000. That’s why it’s so important for prospective homeowners to be aware of the fees associated with a mortgage. It’s a similar situation for legal fees, with the range paid varying from £0 to £600, with an average of £89."²

The survey showed that many first-time buyers are unaware of important financial considerations when factoring in additional expenses into their purchase budget.

• Although nearly 50% of first-time buyers bought their homes with a mortgage, only 7% knew about the mortgage administration fee before securing their mortgage.
• 79% were unaware of stamp duty costs, for which the government have implemented a first-time buyer stamp duty relief measure in England and Northern Ireland – if you’re buying a property up to £425,000, you don’t have to pay stamp duty.³
• Less than half (45%) were aware of survey costs. When buying a property, a valuation (checking if the property is worth what you’re offering) is essential and usually involves paying a fee to your lender. A survey is more detailed than a valuation and checks that the property is structurally sound, so can be beneficial. Survey fees vary depending on the level of detail requested and the size and value of the property.
• Only 40% were aware of conveyancing fees, which can cost between £800 - £2000.⁴

Kellie Steed offers top tips on what to consider before becoming a first-time buyer:

“Before becoming a first-time buyer there are a range of factors to consider. You’ll need to assess whether you’re financially prepared, and what support you may need, and think about the property itself in terms of what you’re looking for."

• Budgeting for additional costs - "Ensure you account for all additional expenses associated with buying a property. There are several costs to consider on top of the mortgage payments. Mortgages themselves come with additional admin fees and costs like surveying and land registry fees are unavoidable. There are also outgoings to account for once you’ve moved into the property, such as insurance, utilities and council tax. Factoring these into your budget early on will ensure you’re prepared and can afford to buy."
• Deciding what type of mortgage to get - "The type of mortgage that’s best for you will depend on your financial situation/stability, preferences and long-term plans. Make sure you seek advice to help with the process - a mortgage broker can help you review all your options and decide which is best suited to your circumstances."
• Be prepared for the property search - "Firstly, you’ll need to decide on which non-negotiable features you want the property to have. You may have to be lenient on any additional features based on your budget, so it’s important to define your criteria. You should also ensure you have a checklist for attending viewings, including questions to ask the estate agent."

[1] Based on Mojo Mortgages 2023 sales data of residential first-time buyers

[2] Based on Mojo Mortgages 2023 sales data of residential first-time buyers

[3] https://hoa.org.uk/advice/guides-for-homeowners/i-am-buying/stamp-duty-for-first-time-buyers/

[4] https://www.uswitch.com/mortgages/guides/ultimate-first-time-buyer-guide-how-much-money-do-you-need-to-buy-a-house/

Survey of 2,001 UK first-time buyers (past two years) (18+) on what methods they used to purchase their property, the purchase process, where they sought advice and what additional costs they were aware of. Responses were given between 10.11.23 - 17.11.23