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Will student debt hamper homeowner aspirations?

by: Andy Gray
  • 09/09/2014
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Will student debt hamper homeowner aspirations?
It’s that time of year when parents get a little teary eyed, either through sadness or relief – maybe even a combination of both, as teenage bedrooms around the country are vacated and disinfected as thousands of students embark upon their first year away at university.

Although, whilst student numbers continue to grow, there also appears to be a rise in live-at-home student commuters because of the costs attached to living away from the parental home.

Even for those lucky/unlucky enough to have their child leave the nest, many parents looking to redecorate or convert that room into a home cinema, games room or den can think again. Almost a third (30%) of students currently attending university are expected to move back in with their parents after they have completed their studies.

Even more worrying are further findings which suggest that while this year’s students expect their debt to be £20,648 on average by the time they graduate, those using a full tuition fee and maintenance loan this academic year would be left with a huge £43,665 after a three-year course. Figures which many continue to underestimate.

But it’s fair to say that the weight of expectation on the Bank of Mum and Dad continues to get heavier and heavier across a wider age group than ever. Rising house prices, the lack in supply of affordable housing, and a fall in the accessibility of high LTV loans – although this is slowly improving – have all led to increasing numbers of first-time buyers and second-steppers having to rely more and more on parental support in the raising of funds. And government schemes/initiatives to help provide additional help.

In terms of financial aid for housing, it’s clear that UK adults are relying heavily on financial support from family members to raise sufficient funds to satisfy homeownership aspirations.

Recent lending figures work to illustrate the forward momentum being shown in the mortgage market with first-time buyer sales reported to be at a seven-year high, but that doesn’t mean lenders can rest on their laurels.

Intergenerational lending is nothing new but its importance within the housing market has never been so apparent. This type of lending can’t and won’t be for everyone; after all it is a serious undertaking which needs the right circumstances and financial considerations.

However, the evolution from the Bank of Mum and Dad into the ‘Family Bank’ means that this area of lending will continue to generate an even greater variety of solutions, meaning it is certainly one that intermediaries should be keeping their eyes on.

Andy Gray is managing director of mortgages at Barclays

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