Aspiring first-time buyers’ costly miscalculations | will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by will always be from Be Scamsmart.

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Lieke Braadbaart

Online Writer
Published: 26/05/2017

New research has found that most aspiring first-time buyers are underestimating how much their mortgage repayments will be compared with their current monthly rental costs, which could prove a costly mistake when hunting for a first home.

Price expectations

The data from My Home Move shows that 34% of would-be first-time buyers are expecting to spend between £100,000 and £150,000 on their first home, while 21% wish to spend up to £100,000. However, even the lowest estimation of the average house price currently stands above £200,000, which means it could be rather difficult, depending on where you live in the UK, to find a decent home at those price points.

Indeed, the figures suggest that those 34% of aspiring first-timers have only an 18% chance of finding a home in their price bracket, with the 21% looking for an even lower price having an 11% chance. And those aren't the only unrealistic expectations.

My Home Move's Doug Crawford commented: "As we know from our research, the majority of aspiring first-time buyers (88%) are currently in rented accommodation, and as such their prime comparison for a mortgage payment is the amount they pay in rent each month. According to Homelet figures the average rent outside of London and the South East hovers around £600 a month – suggesting that most aspiring first-time buyers want a like-for-like swap in monthly outgoings, or even a saving."

Of those looking in the lowest price range, the majority hope to spend around £350 per month on their mortgage, with those in the £100,000-£150,000 bracket expecting their mortgage to cost somewhere around £550 per month. The 25% of people looking for a home in the £150,000-£200,000 bracket, meanwhile, would also prefer monthly repayments of £550. They are all very likely to be disappointed.

Monthly mortgage payment realities

Further research shows that in actuality, a home costing £100,000 would command a mortgage of £450 per month, 28% more than the £350 that is expected, while a property worth £150,000 tends to cost £676 per month in repayments, which would be 23% more than hoped for. The greatest mismatch is found when looking at the average for houses costing £200,000, where the actual mortgage spend would be £901, a 64% difference in expectations.

Of course, these figures are based on an average first-time buyer mortgage with a 5% deposit, and so there could be much better deals out there, but it will still pay for those looking to purchase their first home to be as realistic as possible about their situation. There is no guarantee that monthly costs will go down when switching from renting to owning.

How to improve your chances

Admitting you have a problem is often the first step to finding a solution, and the same can be said here. If first-timers are adamant about decreasing their monthly payments through buying property, they would do well to get their heads out of the sand and keep a close eye on the first-time buyer mortgage Best Buys instead, where the lowest mortgage rates available to all can be found.

An even better, though admittedly more difficult way to decrease available mortgage rates would be by getting a bigger deposit together. A 10% deposit could decrease the rate you can find by quite a bit, with some of these 90% loan-to-value mortgages appearing in the regular fixed mortgage Best Buy charts.

This would, of course, require saving for longer and/or making tough decisions about where you spend your money compared to what you save. If you do decide to go for this option, consider putting your deposit in a fixed savings account or ISA, to help it grow.

Doug has tip too, suggesting that once you have your deposit sorted, "we'd strongly recommend aspiring first-time buyers check their figures and have their mortgage agreed in principle as soon as possible. This will enable them the very best chance possible of securing their first home, putting them one step ahead of other speculative house-hunters."

With so many aspiring homeowners hunting for properties, and an 18% or less chance of finding a home within your price bracket, it pays to be well-prepared.

Make sure your credit score is up-to-scratch before applying for a mortgage

Check out the first-time buyer charts

Competition is still going strong in the fixed mortgage charts

The Help to Buy ISA Best Buys could bring a decent deposit more within reach


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