Mortgage providers will need to change the type of products available to keep the housing market buoyant because student debt is preventing graduates getting onto the property ladder, according to research commissioned by the Council of Mortgage Lenders (CML).
A study appearing in the CML’s Housing Finance by Robin Spencer, senior partner at Sambrook Research International, suggests mortgage providers will find fewer of tomorrow’s graduates are able to buy property if they do not develop products.
Growing student debt and Government proposals for the introduction of higher top-up fees at universities will also make it harder for graduates to appear as suitable borrowers compared with non-graduates.
The CML report said: ‘Few financial institutions ask their mortgage customers if they are graduates or not.’ There are just a handful of mortgage products which recognise levels of graduate debt by carrying 100% LTV and a higher income multiplication, or offer a parent guarantor option. As a result, higher debt is likely to delay the point at which graduates are able to buy property.
This could increase the number of shared mortgages between friends, according to the research, as well as guarantor mortgages which require parents to act as guarantors or use some form of equity withdrawal products.
Yet fresh lender innovation of products and recognition of the pressures future graduates face could ensure the mortgage sector still has a market to provide for in the future.