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Over half of first time buyers need bigger deposit due to pandemic

Young couple sitting in the kitchen, sorting out their finances

Saving up for a deposit, securing a mortgage, finding the right home at the right price... buying your first home is challenging enough, without the costs escalating. But that's exactly what many first time buyers have been through when buying a property during the pandemic.

New research by Aldermore bank shows that people who have bought their first home in the period since March 2020 have experienced an increasingly expensive process, stretching them to raise thousands of pounds in additional funds.

It comes as the latest monthly data from Nationwide reveals that house prices have gone up by 10% in the past year and by nearly 15% since the start of the pandemic. Across the UK, the average price of a home now stands at £252,687.

Over half (58%) of first time buyers in the past 18 months needed to raise a larger deposit than initially intended, due to the impact of Covid-19. The average increase was an additional £22,849, bringing the deposit size up to £62,572 (an average of 18.6% of the property value). It took first time buyers who have bought since the beginning of the pandemic an average of nearly five years (4.6 years) to save up enough.

The process of buying has also become more complicated, with delays and false starts increasing the challenges and expense, Aldermore found. Even having an offer accepted took multiple attempts for many; two in five (40%) took two or more offers to secure the home they bought, stretching out the process and raising costs. What's more, before they got to that stage as many as half (49%) had had a house purchase fall through during the process of buying. This cost new buyers an average of £2,403, with one in nine (12%) spending £4,000 or more.

Increased challenges and delays meant that first time buyers were delayed by an average of three months, with one in six (16%) delayed by five months or more.

And the financial impact forced over half (52%) to leave their house empty for a few months because they were unable to afford furniture immediately. The stress of the house buying process also affected people's personal lives, with 46% saying that the process caused issues in their relationship.

"Becoming a home owner is a wonderful step forward in a person's life but our research shows the persistent effects of the pandemic are causing high levels of financial challenges in the journey," commented Jon Cooper, head of mortgage distribution at Aldermore. "While costs and complicated processes may feel daunting, we've found first time buyers are glad they did it, with 78% saying the stress was worth it to find a home.

"I would advise would-be buyers to plan carefully to ensure they are prepared for the range of costs involved and to seek a broker who can be a great help in cutting through the jargon and guiding you through the process."

Posted by Fidelius on December 6th 2021

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