FTB outlook 'bleak'

This was 3 per cent higher than last year’s survey. This does not just affect recent graduates - a quarter that graduated ten years ago are still not on the housing ladder.

Unaffordable house prices are increasingly squeezing graduates out of the market. Three in five (70%) non-homeowning graduates cite this as a major hurdle preventing them from home ownership, up six per cent from last year. This is not surprising when you consider that the average property price for graduate first-time buyers is £122,045 rising to £179,228 in London. This has risen 14% in the last year (from £107,070).

One in five (19%) believe that they would not be able to afford mortgage payments if they bought a house, demonstrating a degree of uncertainty with the housing market. Further reasons were also cited:

• 58% of graduates believe they do not earn enough to get them on the housing ladder;
• Almost a third (27%) just cannot save for a deposit;
• One in six (18%) believe they are just not ready to make the commitment.

With the average deposit for graduate first-time buyers currently at £16,666 (rising to £26,536 in London) buying a home is likely to remain an unrealistic dream for many. Debt is also an issue - the average amount graduates leave university with is now £10,361. One in ten (9%) believe having to pay off their student loan will prevent them from getting on the property ladder, and one in eight (13%) cite other debts such as credit cards and personal loans as a barrier.

Richard Clark, head of product development and marketing at Scottish Widows Bank, commented: “This year’s report reveals that the situation really is getting worse for graduates. The main issue is that property prices and inflation are continuing to rise, but starting salaries have not moved in line with this. First time buyers are struggling to save for that deposit, and recent interest rate rises are acting as a further deterrent. Owning a home is likely to remain a pipe dream for many.”

Home ownership is such an unrealistic dream for many that:

• Almost one in ten (9%) cannot ever imagine buying.
• 4% think it could be at least ten years.
• Trends from the report reveal that, in fact, of those who graduated two, five and ten years ago, 76, 51 and 25 per cent are still yet to buy their own home.

For those graduates who have succeeded in getting on the property ladder, almost two thirds (63%) bought with a partner, and if they were to split up, 69% would not be able to buy their other half out. Looking at the number of people who have graduated over the last five years – over 540,000 graduates have bought with their partner and over 375,000 wouldn’t be able to buy their partners out.

When looking back at barriers they faced when buying a home:

• Nearly a third (29%) of graduates believe that not needing a deposit would have helped them get on the property ladder;
• A quarter of graduates believe that if lenders considered future earning potential, rather than current salary, then this would have helped them.

Clark added: “It is encouraging that Gordon Brown and the opposition parties are putting so much emphasis on affordable housing for first-time buyers, but there is still much to be done to make the market more accessible.

“It is also up to lenders to continue to show innovation in designing products that help first time buyers get on to the property ladder. We have seen an increase in the popularity of our 100% mortgage products which, along with parental guarantors, can help those would-be homeowners who don’t have a deposit or sufficient earnings.

“So although our survey shows that it is increasingly difficult for graduates to buy their first property – there are options available to those who want to turn that pipe dream into a reality.”

Of those graduates not yet on the housing ladder, they cite the following as the one factor that would most help them get on the property ladder:

• Being able to have my ideal job in an affordable area – 16%
• Not needing a deposit – 15%
• Lenders considering future earning potential rather than current salary – 13%