New research reveals that a third (31 per cent) of homeowners surveyed have rushed into buying a property to take advantage of the tax break, rising to 56 per cent of owners aged 25-34 and to 49 per cent aged 16-24. The research from Tymit – the UK’s first instalment-only credit card – showed that despite these savings, homeowners are facing an unexpected welcome home gift: debt.
Two-thirds of home owners surveyed have forgotten to budget for purchases such as furniture and decorators – with the average overspending by £14,861 – despite having more time to plan their big move. With many Brits rushing up the property ladder this year, Tymit predicts they’ll blow their moving budgets even further.
There’s no place like debt
The average budget for kitting out a new home was £22,387, but when analysing respondents’ actual spending, the research reveals that Brits surpass their original target by 67 per cent – at £37,248 total – which sends them into the red. Londoners are crowned the worst planners as they overshoot their budget by £27k, and one in five go over by £50k. Those residing in the capital are followed by movers in the West Midlands (£18k) and the South East (£17.8k).
With the average house price in England costing £268k, homeowners would be saving £3.4k thanks to the tax break. But these savings are bittersweet, with bad budgeting surpassing stamp duty savings by a massive 337 per cent.
As a result of this bad planning, Brits spend almost three years paying off these additional expenses across a mix of loans and credit cards. A staggering 60 per cent of homeowners surveyed say they would do things differently if they had the chance, with a fifth saying they would budget better and the same amount doing more thorough research into furnishing and decorating costs. Of those surveyed, 11 months is the optimum amount of time to prepare.
The top five purchases likely to blow home-buyers’ budgets are:
- Building Service Charges – 59 per cent
- Plumbing Bills – 57 per cent
- Kitting out the Bathroom – 51 per cent
- Kitting out the Garden – 51 per cent
- Decorators – 51 per cent
The top five lifestyle purchases associated with home moving, likely to blow home owners budgets are:
- Increased Energy Bills – 62 per cent
- Second Car – 53 per cent
- Countryside Attire – 44 per cent
- Buying a pet – 42 per cent
- New toys – 42 per cent
Martin Magnone, CEO and co-founder of Tymit said: “Home is where the heart is, but rushing to make one saving on your home move can cost you more in the long run. Brits should be planning their expenses longer term as it is not just essential for budgeting the big move, but for the whole new lifestyle it brings too. For when the unexpected does arrive, there are ways to fund them without saddling yourself in revolving debt. Responsible lines of credit available – such as Tymit – have no hidden fees and are completely transparent on interest rates, helping you effectively budget your way back to zero, and enjoy your new home in the process.”
To help the UK’s home buyers budget better, Tymit has partnered with Clare Seal – founder of The Financial Wellbeing Forum and the Instagrammer behind My Frugal Year – to share her top tips for the home buying process:
- Stress test your budgets: The last year has shown us that your financial situation can turn on a dime. With this in mind, create a budget that factors all of your regular incomings and outgoings, then stress test how factors outside of your control – such as a reduction in salary – would dent your overall finances. This will help you to set a safety net should the worst happen, enabling you to determine a realistic mortgage range and calculate leftover income for ongoing expense that won’t put you out of pocket.
- The little things add up: When you’re spending hundreds of thousands of pounds on a property, a hundred here and there on the little things seem inconsequential in comparison. But they’re not – the little things all mount up. Whether it’s new cutlery, crockery or finishing touches, record everything in your budget to keep your spend on track.
- Don’t forget about lifestyle: They say home is where the heart is, but it’s important that you think about your lifestyle outside of the home too. Factor in these costs to your budget – and try to think about how it might change in your new area. Will transport costs increase? Will your gym membership change? Planning for these changes will ensure you can make the most of the new area, so your home doesn’t feel like your prison!
- Trust the numbers, and nothing else: Buying a house is exciting, but when buying a house with a partner, relative or friend, it can quickly lead to disagreements on which items warrant more budget. If you’re in heated negotiations about which sofa, carpet or TV to purchase, always refer to your budget and let the numbers – not the heart – have the final say.
- Use credit wisely: With the best will in the world, in can still be easy to blow your budget from time to time. If you do find yourself using loans, credit cards or Buy Now Pay Later services, make sure you do so responsibly. Having a credit card can be no bad thing as long as you have a plan to manage it, and don’t over-commit yourself – brands such as Tymit come with no hidden fees or interest rates, and have handy interest calculators that help you to create a repayment plan that works best for you and your home.
This post has originally been featured in Property Wire.