Graduates May Find it Harder to get a Mortgage.

by Mark Johnston

Graduates may find it harder to get a mortgage.

Under new funding arrangements for English universities tuition fees are now up to a staggering £9,000 a year and therefore student cash has rarely been tighter.

A spokesman for the National Union of Students (NUS), said “debt is now a fact of life for the majority of students.

It is estimated that the average student will graduate with debts of around £43,000 alongside their degree.

According to new research from moneysupermarket.com, a growing number of people aged 18 to 34 have already put themselves at risk of extra fees and mounting interest by borrowing cash on expensive lines of credit over the last year alone.

In the current climate, when people are already struggling to get by on tight budgets, many of this younger generation could be putting themselves at risk of debt problems.

Kevin Mountford, the head of banking at moneysupermarket.com, a comparison website, says “students should ensure they can realistically pay back any money they borrow from the bank”.

Recent research has suggested that the cost of paying off student loans will make it harder for graduates to buy a property.

These huge debt loads do not just pressure students to find high-paying jobs after they graduate: They are also making it nearly impossible for some to get the financing they need to buy a home.

A big problem with student loans is that they will now increase slightly more quickly than inflation, meaning the longer a student holds the loan the larger the debt will be.

Figures from the Royal Bank of Scotland (RBS) show that student loan repayments, which increase as the graduates pay increases, will eat up 7 per cent of the amount that a potential first time buyer has left over to save for a deposit after essential bills by the age of 26.

Would be first time buyers are already facing a huge struggle to buy their first home thanks to the shrinking availability of low deposit mortgages and lenders tightening their lending criteria.

Even graduates who do succeed in landing lucrative jobs can find themselves unable to get mortgage loans. The lack of credit history combined with reluctance on banks’ part to trust a short employment record in todays econom climate hits first-time homebuyers especially hard.

A buyer with a 90 per cent typical first time buyer mortgage on an average graduate income would spend 40 per cent of their income on their mortgage, this increases to 44 per cent on average for those with a student loan.

Financial experts state that although student loan debt only adds two or three months to the time it takes to save a 10 per cent deposits, it does make it more difficult to pay the mortgage and still live comfortably.

However, it is worth bearing in mind that student loans should not appear on a credit file, so they will not hamper a graduate’s chance of getting a mortgage.

 

 

 



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