Premature Partners: Home | Financial Compatibility Test | Regional Statistics | News Release
News release
Wednesday 17 October 2007
FIRST TIME BUYERS PAY THE PRICE
FOR PREMATURE PARTNERSHIPS
First time buyers are set to pay the price for rushing into buying a home with people they barely know in order to get a foot on the property ladder.
New research from Skipton Building Society reveals that more than one in five first time buyers who have taken out a mortgage with someone other than a spouse (20%) have done so with a person they have known for less than a year – including one in five people who are buying with a fledgling partner (18%).
And the price of premature financial partnerships can be high. A quarter came to an end because the borrowers split up or fell out, leaving one in four people out of pocket in some way. One in 10 people whose joint mortgage came to an end (9%) received nothing whatsoever, while one in six (16%) only received their share of the property's original value.
There appears to be a reluctance to discuss financial details in the rush to buy together, as 37% of first time buyers whose mortgages ended had no firm agreement about what would happen in the event of one person leaving.
This is despite the fact that, for more than half of unmarried property owners (55%), the amount contributed to the cost of buying the home is unequal; the average difference between contributions over the lifetime of the mortgage is £28,570, with one in 10 unequal mortgages (12%) out of kilter by over £60,000.
The emotional cost, however, is no less high. Two fifths of first time buyers whose joint mortgage ended (39%) felt that they had bought together too soon, with a third (33%) regretting having bought with that person. With the benefit of hindsight, more than a quarter (28%) said they should have spent more time getting to know the other person and one in four (25%) that they should have lived together before buying.
Financial factors appear to be fuelling the headlong dive into taking out mortgages. More than half (56%) were taken because the arrangement made financial sense, with one in four people (25%) unable to buy alone and one in five (22%) desperate to get on the property ladder.
Perhaps because of this desperation, buyers appear to be throwing caution to the wind, as a quarter (25%) of co-mortgagers have bought a property with someone they had never previously lived with.
And the situation is set to continue, as 10% of people looking to take out a joint mortgage in the next 12 months with someone who is not their spouse admit they have known their co-borrower for a year or less; a third (32%) have not even lived with the person they are set to buy with.
The research reveals that the most common person with whom to take out a joint mortgage is a partner (48%), followed by friends (24%). Others appear to be deciding that blood is indeed thicker than water and taking out joint mortgages with siblings (10%), parents (7%) or other family members (5%).
For those looking to buy a house with friends, family or fledgling partner, Skipton has created an online test at www.skipton.co.uk, to allow buyers to determine how compatible their attitudes to money are, to help avoid any regrets further down the line.
Psychologist David Moxon, who created the test, said, "When assessing financial compatibility, it's not necessarily a question of like matching like – people who are risk-averse but like the finer things in life may make excellent financial partners for people who tend to watch their money carefully but are prepared to take calculated risks.
"This test looks at attitudes to risk, thriftiness and extravagance to be able to put people into four categories. From this, they can see who they should consider entering into financial partnerships with, like buying a house, and also who they should avoid."
Jennifer Holloway, head of media relations at Skipton Building Society, added, "We can all understand the panic that potential homebuyers must feel at the news that house prices are still rising – to them, the dream of affording their own home has turned into a nightmare. So it's not surprising that they're resorting to desperate measures to try and put an end to their misery.
"But desperation shouldn't mean that caution is entirely thrown to the wind; at Skipton, we've seen first hand what can happen when people, particularly relative strangers, have bought in haste only to repent at leisure – usually with emptier pockets. For that reason, we can't stress enough the value – both in money and peace of mind – of getting an agreement down on paper stating exactly what will happen, not just for the initial purchase but also when it comes time to sell.
"It's also important that people get to know each other, and in particular their attitudes to money, as it could help when choosing a mortgage. Skipton's fixed rate mortgages are great for those who want to know exactly what they'll be paying each month, whilst a base rate tracker might be a consideration for someone who's more financially confident."
ENDS
For further information, please contact:
Mel Garfield, Band & Brown Communications, 020 7419 7312 or mel@bbpr.com
Michael Sheen, Band & Brown Communications, 020 7419 8616 or michael@bbpr.com
Katie Magee, Band & Brown Communications, 020 7419 6976 or katie.magee@bbpr.com
Editor's notes
- Research was carried out online during August 2007 by PCP Market Research. A total sample of 1,001 UK adults were interviewed, consisting of: 350 who had previously had a mortgage with someone who was not a spouse; 319 who currently have a mortgage with someone who is not a spouse; and 332 who are looking to take out a mortgage in the next 12 months with someone who is not a spouse.
- Skipton is the UK 's sixth largest building society, with a national presence represented by its 79 branches, covering the country from Aberdeen to Plymouth . An innovator in the field of mortgage and investment products, the Society stands apart from its counterparts as the parent to 17 subsidiary companies, many of which operate in the financial market.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.