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Tuition fees hike will impact aspiring homeowners

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  • 19/01/2011
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Tuition fees hike will impact aspiring homeowners
A new decade brings with it new problems, especially for aspiring homeowners who will have to wrestle with some of the biggest financial obstacles yet over the next few years.

Following the government’s controversial decision to raise tuition fees by 2012, English universities will be able to charge up to £6,000 per year, and in ‘exceptional circumstances’ fees could be as much as £9,000. Graduates will leave university burdened with a debt that will run to tens of thousands of pounds.

A young person carrying around £40,000 in debt during their first years of employment, and having to service that at a close to market rate of interest, will find it even more tricky then they do now to save up for a nest egg to buy their first home.

My university debt is just over £10,000 and is manageable given my income. But the thought of leaving university with a minimum debt of £21,000 is depressing, especially in a climate where jobs are being cut left, right and centre.

My generation often dream of having enough money set aside to purchase a home or an apartment, but for the bulk of us this will never be a reality.

The reality we face is either living at home or renting for the rest of our lives. It’s a win-win situation for landlords and parents who like having their offspring around, but a lose-lose situation for everyone else.

The real point is that before the fees hike was even announced, new buyers were already having a hard time getting a foot on the property ladder with lenders demanding higher deposits of around 25-30%.

First-time buyers could also find themselves excluded from the interest-only mortgage market by the end of 2011, as multiple lenders including Santander, RBS and Natwest, Barclays, Skipton Building Society and Cheltenham & Gloucester, no longer offer deals above 75% LTV.

More gateways are needed to help new buyers get on to the property ladder, but the only problem is there aren’t many options left.

Most people will be questioning the FSA’s next move, following its increased interest in the provision of interest only.  How stringent will future affordability checks become? And where will its proposals leave aspiring homeowners?

Last week, David Cameron criticised banks and building societies for being too cautious with their mortgage lending and preventing the housing market from progressing. He was right to call for the banks to return to ‘respectable lending.’ But without the government forcing the banks to lend more, it’s hard to see first-time buyers getting more financial assistance.

While it’s fair to say that first-time buyers will not be the movers and shakers of the housing market merry-go-round this decade, the question we have to ask ourselves is whether it’s fair to deprive them of the opportunity to be future homeowners?

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