First time buyers expect mortgages to increase by £30,000

August 23, 2013, 2:30 PM GMT+0

People looking to buy their first home expect to have to borrow £30,000 more than people who have entered the property market in the past two years, new research from YouGov suggests.

The “First Time Buyers” report shows that the average expected mortgage for people looking to buy their first home is £155,852. This compares to the average mortgage of £121,987 for people who have bought their first house since 2011.

Potential entrants into the property market expect to pay 25% deposits, the same as those who have recently bought their first homes. However, due to the increase in house prices, the average amount of equity needed has increased from £31,954 for existing first time buyers to £51,802 for those currently looking to purchase. Given that their average gross household income of £50,640, this implies a mortgage to household income multiple of three, this figure was 2.2 when existing first time buyers took out their mortgages.

YouGov’s report suggests that people who have recently bought their first house are more pragmatic than those currently looking to do so, implying that potential first time buyers have unrealistic expectations of purchasing a property.

Three in ten (31%) people looking to buy their first home are choosing the location based on where they can afford compared to almost half (48%) of recent first time buyers. On a related note, about a fifth (19%) of people looking for their first home want to buy because they feel they belong to a neighbourhood compared to just 8% of recent first time buyers.

James McCoy, Research Director at YouGov, says: “The recent surge in house prices have made deposits difficult for first time buyers. While the percentage remains the same the amount of money it represents is increasing month by month. Part of the problem is that a lot of first time buyers have unrealistic expectations about how and where to purchase a house. While the government’s Help to Buy scheme will help on the financial side of things, it will not change the fact that many potential buyers need to adopt a more pragmatic approach to how they go about buying a house. Instead of breaking the bank trying to stay where they are familiar with they may be able to get better deals by going for locations to fit their budget.”

Learn more about the "First Time Buyers" report

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