The big debt question for graduate mortgages
Both the housing and mortgage markets may seem like fairly inhospitable places for young professional graduates.
But although first-time buyers do seem to be bearing the brunt of housing market woes, newly qualified professionals have less to be concerned about, despite their debt.
Significantly, graduates differ from the first-time buyers in several vital respects that are likely to improve their access to the housing market with mortgages for professionals.
Existing debt
But one of the biggest barriers to getting a foot on the housing ladder common to both groups is debt, including reconciling homeowner loans with existing ones.
However, according to the debt charity Credit Action, average graduate debt in the UK is dropping and is currently at its lowest rate in six years, with the average graduate owing £12,363.
Moreover, only 54 per cent of graduates leave with debts of more than £10,000.
Even if graduates happen to owe more than the average Briton, they are both expected to find themselves in better paid job and will pay debt on their student loan at a lower rate than if it were a standard consumer loan, particularly in the current market conditions.
More importantly, they are only required to pay debts on student loans according to their earnings, rather than being set a minimum rate independent of their wage.
Choice
There are fewer options available for graduates and first-time buyers however, following the widespread withdrawal of mortgages with 100 per cent loan-to-value.
Head of mortgages at moneysupermarket.com explained that the removal of 100 per cent mortgages is "yet another door closed for first-time buyers".
In addition, many lenders are also demanding higher deposits.
Most recently, it was Cheltenham & Gloucester that stopped offering mortgages with ten per cent deposits. Others, such as Nationwide, are demanding deposits as high as 25 per cent.
But while this may have left first-time buyers with scant pickings among loans from lenders that have erred on the side of caution with rate rises, despite continued cuts by the Bank of England, graduates have a little more choice.
Most importantly, professional graduates are the kinds of customers lenders are keen to attract.
Having relatively few financial commitments and higher average wages than many first-time buyers, the risk factors are likely to be more agreeable for lenders, and hence change the borrowing terms available.
According to head of credit cards and loans at Moneyfacts, Samantha Owens, "because they're trying to get the graduates in, they're trying to attract them with rates that are slightly more preferential than they're going to give to other people".
"They're not going to be judged the same as a 35-year-old who has tonnes of debt," she added.
Finally, they're also younger, which means that lenders will be happier to have them indebted for a prolonged period of time.
So in terms of mortgages, graduates owe more to their degree than their financial debt and, unlike many borrowers, are the kinds of customers lenders want on their books.
Mortgages for Professionals is a specialist mortgage broker offering a whole-of-market choice of all UK lenders. We provide a service dedicated to individuals with professional qualifications and high projected earnings – from doctors and dentists, to accountants and engineers
But although first-time buyers do seem to be bearing the brunt of housing market woes, newly qualified professionals have less to be concerned about, despite their debt.
Significantly, graduates differ from the first-time buyers in several vital respects that are likely to improve their access to the housing market with mortgages for professionals.
Existing debt
But one of the biggest barriers to getting a foot on the housing ladder common to both groups is debt, including reconciling homeowner loans with existing ones.
However, according to the debt charity Credit Action, average graduate debt in the UK is dropping and is currently at its lowest rate in six years, with the average graduate owing £12,363.
Moreover, only 54 per cent of graduates leave with debts of more than £10,000.
Even if graduates happen to owe more than the average Briton, they are both expected to find themselves in better paid job and will pay debt on their student loan at a lower rate than if it were a standard consumer loan, particularly in the current market conditions.
More importantly, they are only required to pay debts on student loans according to their earnings, rather than being set a minimum rate independent of their wage.
Choice
There are fewer options available for graduates and first-time buyers however, following the widespread withdrawal of mortgages with 100 per cent loan-to-value.
Head of mortgages at moneysupermarket.com explained that the removal of 100 per cent mortgages is "yet another door closed for first-time buyers".
In addition, many lenders are also demanding higher deposits.
Most recently, it was Cheltenham & Gloucester that stopped offering mortgages with ten per cent deposits. Others, such as Nationwide, are demanding deposits as high as 25 per cent.
But while this may have left first-time buyers with scant pickings among loans from lenders that have erred on the side of caution with rate rises, despite continued cuts by the Bank of England, graduates have a little more choice.
Most importantly, professional graduates are the kinds of customers lenders are keen to attract.
Having relatively few financial commitments and higher average wages than many first-time buyers, the risk factors are likely to be more agreeable for lenders, and hence change the borrowing terms available.
According to head of credit cards and loans at Moneyfacts, Samantha Owens, "because they're trying to get the graduates in, they're trying to attract them with rates that are slightly more preferential than they're going to give to other people".
"They're not going to be judged the same as a 35-year-old who has tonnes of debt," she added.
Finally, they're also younger, which means that lenders will be happier to have them indebted for a prolonged period of time.
So in terms of mortgages, graduates owe more to their degree than their financial debt and, unlike many borrowers, are the kinds of customers lenders want on their books.
Mortgages for Professionals is a specialist mortgage broker offering a whole-of-market choice of all UK lenders. We provide a service dedicated to individuals with professional qualifications and high projected earnings – from doctors and dentists, to accountants and engineers
