First-time buyers ‘biting off more than they can chew’

Nearly three-quarters of first-time buyers are stretching themselves financially to get onto the property ladder. 

A study by the Money Advice Service has discovered 74 per cent of Britons who have purchased a house in the last two years bit off more than they could chew in an effort to escape the rent trap. 

One in three decided to max out their budget in an effort to live in a particular location, while around 25 per cent were forced to reassess their spending level because of a lack of available properties. 

When pushed, 19 per cent admitted with the benefit of hindsight they would have bought a smaller, less expensive house.

Some 38 per cent of respondents are lying awake at night thinking about their financial situation as worries grow they could slip into debt due to high mortgage repayments. 

Individuals also misjudged the additional costs associated with buying and moving into a home, as people ended up having to spend an average of £1,300 more than they initially planned to. 

"I urge all home buyers – even those higher up the property ladder – to ensure they are not taking on too much if they've borrowed the maximum available," said Caroline Rookes, chief executive officer of the Money Advice Service. 

"It's really concerning to hear so many recent first-time buyers have overstretched themselves financially."

New rules will come into force in April that will see lenders forced to carry out more stringent checks to establish whether or not people can actually afford the repayments on the mortgage they are trying to take out. 

Worryingly, one-quarter of first-time buyers admitted they would really struggle financially if the main breadwinner was to lose their job. This demonstrates how many couples are in a precarious position and so they should be making provisions to mitigate the risk of defaulting on their mortgage. 

By Amy White