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11 October 2008 09:07 BST

Unlucky graduates under the property ladder

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A recent report by Scottish Widows Bank has highlighted the increasing problems for graduates wanting to take their first step on the property ladder. Almost 60 per cent of those who graduated 10 years ago have felt unable to afford mortgages due to inflation, student debt, and the price of homes rising faster than starting salaries.

The figure, taken from the third annual Graduate First Time Buyer report, shows a 3 per cent year-on-year increase that will make grim reading for the seven out of 10 of those who said house prices were beyond their budget and nearly six out of 10 who said their earnings were too low to afford to buy. Other reasons given for not purchasing a property were that they would not be able to keep up the repayments or could not save enough for a deposit in the first place, while around one in six said that they were not ready to commit to buying yet.

In recent years the economic conditions for first-time buyers among graduates has only got worse as students leave university with an average debt of about £10,000 to work in jobs whose salaries have been unable to keep up with a 14 per cent rise in house prices in the last year alone. The time and money necessary to pay off the loans needed to study at university has proved to be a further hindrance.

The most popular way of leaping on the ladder seems to be with a little help from either friends or family with 63 per cent of those who have managed to buy their own home pooling their resources with a partner despite around 70 per cent of them admitting that they wouldn’t be able to afford to buy their partner out, should they wish to leave.

Meanwhile, as graduates who are looking to buy for the first time strive and struggle to save up a deposit, recent rises in the interest rate have proved to be a double-edged sword. While they did serve to slow the inflation of house prices in July, it remains to be seen whether this trend will continue and in the short term it has merely put off anyone tempted to take the plunge by making mortgages more expensive.

There are still those who retain some optimism in the future of the U.K. housing market though, as almost 30 per cent of graduates believe they could afford mortgages providing a deposit wasn’t a requirement. It is a sign of the times that some of them feel the only way forward is for a change in the process of buying a property, as a quarter of them also feel that mortgage providers should rate graduates on their potential earnings rather than their starting salary.

With the cost of making that first big step onto the property ladder proving increasingly prohibitive to first time buyers it has become more and more important to find a mortgage that fulfils your needs and represents good value. This can be a convoluted process but you can save yourself some time and hassle by consulting a mortgages comparison site such as fool.co.uk. I’d also recommend that prospective mortgage customers use a mortgage calculator such as the one found on the Natwest site (you’ll find something similar on the websites of most major mortgage lenders or indeed this BBC calculator.) At the time of writing the Co-operative Bank and RBS Mortgages appear to offer competitive deals. End of story

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Unlucky graduates under the property ladder

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