First-time buyers are ‘failing to count the cost of home-ownership’

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First-time buyers are failing to count the true cost of purchasing a home.

That’s according to a new study by Pegasus Personal Finance who surveyed 1000 people in Scotland about the added expenses associated with buying a property.

Some 38.5% of new homeowners don’t account for unexpected fees when taking the leap, according to the Pegasus survey.

CHAPS bank transfer fees, search fees and land registry fees were the biggest shocks for first-time buyers – with over 1 in 4 homeowners caught off-guard by the charges.

26.9% of those surveyed said they didn’t expect the huge expense of mortgage set-up fees - while excessive solicitors’ fees and stamp duty scored 19.2% and 15.4% respectively.

Excluding stamp duty, the unforeseen fees could amount to a sizeable £1850 bill - according to recent data from the Money Advice Service.

Property premiums

Post-purchase fees also hit new homeowners hard.

1 in 10 participants did not account for an increase in utility bills as a result of moving to a larger property, while the same number were surprised to see their car insurance costs increase.

Optional but ultimately necessary home or life insurance policies also scored highly in the survey, taking 16.1% of the vote.

One surprising outcome of the study saw respondents reveal a lack of knowledge surrounding interest rates and the impact they can have on the combined cost of a mortgage.

A notable 12.9% of homeowners, assumed to be those with variable rate mortgages, admitted they haven’t prepared for an increase in interest rates - should they unexpectedly climb from a seven year low of 0.5%.

Feathering the nest

Unforeseen housing renovations or repairs, such as installing a new heating system or tackling damp, accounted for over a quarter of all ‘hidden’ costs.

A substantial 28.8% of participants underestimated removal charges - while a staggering 19.4% of those surveyed viewed furniture and decor as a surprise expense.

Jonathan Le Roux, co-founder and director of Pegasus Personal Finance, said: “The results of this study showed some real eye opening insights and surprisingly displayed a lack of thorough understanding when it comes to the cost of buying a property.

“When buyers are working out their budget for a future home move, forgetting the significant costs associated with stamp duty, solicitors fees or similar can really put a spanner in the works at the last minute.

“Our advice is to do your research and carefully list all the associated costs so you go into home ownership with your eyes wide open.

“It may be tedious but completing this homework is essential to everything going smoothly”

According to Zoopla, the average house price in the UK is £172,282 - rising to over £574,000 in London - before any unexpected costs come into play.

Topline results:

CHAPS fees – 38.5%
Search fees – 34.5%
Land registry fees – 30.8%
House renovations or repairs – 29%
Moving costs – 28.8%
Mortgage set-up fees – 26.9%
Furniture and decor – 19.4%
Solicitors fees – 19.2%

Home or life insurance – 16.1%
Stamp duty – 15.4%
Interest on your mortgage – 12.9%
Increase in utility bills/car insurance – 10.2%
Other – 7.7%