MyFinances.co.uk
News feeds Free newsletter

All the latest personal finance news - helping you make the most of your money

Associate Article

Graduates struggle to get on the ladder

Of those who graduated from higher education in the last 10 years, only 40 per cent have been able to buy their own homes. With the average student loan debt totalling almost £10,000, many cite this as the main obstacle in buying property and one in six have stated that, with hindsight, they wish they had not taken out a student loan to begin with.

The continual increase in house prices and interest rates is well documented, but salaries, especially for graduates, have not risen in keeping with them. This is forcing many graduates to remain in rented accommodation or, in some cases, forcing them to move back into their family homes.

The average graduate wage is between £17,000 and £25,000 a year. At least £16,666 is required to act as a deposit for a mortgage on a first home, with the average price of a first-time property having leapt up by 14 per cent to £122,045. For many, simply finding the available funds to act as a deposit is a virtual impossibility.

However, there is now a rise in the number of mortgage lenders selectively targeting graduates as customers. Graduate Mortgage Schemes can offer a mortgage of between 102 per cent and 125 per cent. This includes the 100 per cent available to cover the outright cost of the property, with an added sum designed to buffer any extra costs, such as solicitor and estate agent fees.

The higher the amount that is offered, the more likely the graduate is going to have to enter into a ‘guarantor mortgage’, in which their parents or guardians act as guarantors, in the event that repayments are unable to be met. More and more companies are offering financial incentives that could enable graduates to step onto the property ladder.

Natwest Mortgages, for example offer what they have termed a ‘graduate package’. This offers an interest-free overdraft facility for the first three years after graduation, combined with an interest-free loan designed to enable graduates to clear their loan debt and manage their finances through a structured repayment scheme.

Ann-Marie Blake, the Head of Student and Graduate Banking said: “Finding a job straight after university is pressure enough without having to worry about paying back student debt. With graduation comes a whole raft of extra expense such as relocation, rent and a new work wardrobe…”

To be eligible for a graduate mortgage at Natwest, the applicant must have a standard degree certificate from a university in the UK. They must also be 21 years old or over and be in permanent employment, having already been through any probationary period set by their employer. Student debt, credit card debt and loan debt will be taken into consideration by the lender as this will reflect the graduate’s ability to make future repayments.

Some lenders also offer something known as ‘income multiples’. This means that they are prepared to loan up to four times the applicant’s annual salary. If the applicant is a professional by this time, some lenders will also offer a scheme known as ‘enhanced income multiples’ which allow more funds to become readily available.

There are plenty of mortgages comparison sites out there to help you find the best deal. Motley Fool, for instance have a useful table in their Mortgage comparison centre and the Beat That Quote website will pool and compare prices on loans and mortgages from across the internet.





Disclaimer:
myfinances.co.uk is not authorised to give advice under the Financial Services and Markets Act 2000.

Terms:
By using this site, you are deemed to have accepted our terms of use.

About Us | Advertise | Contact Us | Privacy
© 2004 - 2008 www.myfinances.co.uk

myfinances poll 

Are rising prices biting you? myfinances.co.uk is running a poll to get your views on the level of inflation in the British economy.

Cheapest Car Insurance
Finding the cheapest car insurance for your car has just got much easier. Use our car insurance comparison service for great results!