At a time when four successive base rate rises have failed to dampen house prices – with mortgage lending in April 18% higher than a year ago - and pushed up the cost of getting on and staying on the property ladder, the new research questions whether a nation of financially-stretched first time buyers know what they are buying, and whether desperation to get a foot on the ladder is forcing them into rushing decisions.
AA Legal’s “Safe as Houses” campaign, is a public awareness programme geared to help homebuyers make informed house purchase decisions, ensuring that the hunger to get on the property ladder doesn’t sidetrack people from properly understanding the financial and legal small-print that underpins the most important purchase of their life. The AA poll asked a GB representative sample of more than 2,000 homebuyers whether they understood the difference between a leasehold and freehold property.
Key findings:
Overall, around 20% of UK adults did not know what a freehold mortgage was – and 49% thought a leasehold mortgage was something other than what is was.
An accurate understanding of this most basic of property terms was lowest among 18-24 year old homebuyers. With young homebuyers planning to spend an average of £159,653 on their first home, only 59% knew what the term freehold meant – and only 57% understood the term leasehold.
A number of young homebuyers had some wild ideas on what property terms meant. Around one in ten 18-24 year olds said that a leasehold property meant you were allowed to rent it to tenants, and 2% thought it meant the homeowner was exempt from Council Tax. When it came to defining a freehold property, 9% of 18-24 year olds believed this related to a property with a lease of 50 years or more and 6% thought freehold properties were exempt from Capital Gains Tax. Perhaps alarming, 2% of young Brits thought freehold properties could only be bought by freemasons.
The research also suggested a north-south divide was emerging, with people north of the Midlands less able to define a leasehold property than people in the south (see table in notes to editors). People in the property-booming North West were least able to define what a leasehold property was.
James Molloy, Head of AA Legal Services commented: “Our research suggests that many homebuyers are so desperate to get onto the property ladder that they may be over-looking vitally important basic legal principals. For years, the legal community has not helped much in terms of engaging the public on legal aspects of home buying, something AA Legal Services intends to put right – by helping the public understand legal issues in plain English, so that they can make informed home buying decisions and feel in control of the process.”
