Debt affects younger generations chances on the housing market
For young people looking to buy their first home, the prospects at the moment are grim. Since the economic downturn kicked in four years ago, it has become harder and harder for first time buyers to get a foot on the ladder of home ownership. The problem is caused by a combination of factors. There is reluctance on the part of lenders to give mortgages to younger buyers, who may need to turn to debt consolidation loans before they can save for deposits. And at the same time there is a lack of suitable housing stock for purchase. The National Housing Federation claims that currently only about half the homes needed are being built.
It\’s common that many people will already have got themselves into debt by the time they want to purchase their first home. They need to get out of it before they can begin to save up for a deposit and some of them are taking out debt consolidation loans.
It has become essential for young buyers to put up a sizeable deposit for their first property. Nowadays many lenders will expect them to provide as much as 25% of the value of the property before they\’ll consider them for a mortgage. This is acting as a barrier to entry for many younger people and increasingly they are forced to ask for financial help from parents.
Something like 150,000 new homes are being built each year but this won\’t be enough to meet the needs of young couples in the future. The UK has a rising population and the facts that people are tending to get married later and that relationships break up all put extra pressure on the available housing stock. According to a recent report by the Joseph Rowntree Foundation, if this trend continues, fewer and fewer couples will be able to buy a home over the next decade or so.
Currently 56% of 30-34 year olds are able to buy their first home, but by 2026 this number will have halved. The Joseph Rowntree Foundation is warning that reform in the housing market is needed, with a significant increase in the amount of new homes that are built annually.
The National Housing Federation says that the existing drop in the number of owner-occupiers is set to continue for at least the next ten years. They calculate that average house prices are now 117% higher than they were a decade ago and that they represent 11 times the average income.
Getting into home ownership at a relatively young age has important consequences for long term financial stability. Once a couple reach retirement age, any drop in their income will be offset by the low cost of housing they will pay after their mortgage has been paid off.
The goal of getting into the housing market is looking further away than ever for today\’s young couples. Often before they can begin to save for the large deposit required by lenders they must pay off existing debts, sometimes using a debt consolidation loan to make this process more manageable. However, by having a significant deposit they will be ensuring that future monthly mortgage repayments are lower.
Learn more about debt. Stop by Timothy Thyme\’s site where you can find out all about debt consolidation and what it can do for you.
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