Every month The Thrift Diaries looks at current money issues that are affecting students, graduates and the younger generation.
What is it?
Last month The Thrift Diaries looked at the low number of approvals of mortgages for first-time buyers. This month a new issue has come to the forefront of the media. The number of people who are unable to get on the property ladder is high due to impossible demands of a down payment or deposit on a property.
Why?
It’s only been just over two years since the financial crisis began which was triggered by people’s inability to pay their mortgage. 100% and even 110% mortgages were on offer meaning people could borrow more than they could afford. Nowadays banks and financial institutions are strict about mortgages. In order to get a good deal on your mortgages many institutions are asking for an upfront deposit of 20-25% of the property’s value. That can set the younger generation back around £50,000!
How will this affect me?
Well, if you’re a student or not you’re inevitably going to affected by this. If you want to buy a property straight out of university it is likely that you will need parental support. If you want to buy a property when you’re 30 and I assume you graduate straight into a job aged 21 then you’ll need to raise 25% of the value of a house for 9 years. If we take the figure quoted above of £50,000 then here is the calculation:
Assumptions: 2% interest earned on savings, basic tax-rate payer
To save £50,000 in 9 years you will need to save £430.40 a month.
What can I do to help myself?
This might sound obvious but start saving as soon as you can. Buying a property is likely to be one of the biggest expenses in your life-time so the earlier you start, the more you can benefit from compounding. It may sound unrealistic to start saving for a deposit on a house now especially if you’re a first year student but if you really want to get onto the property ladder then it’s never too early to start saving. It’s also a good idea to start building a good credit score by taking out a credit card.
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Hi Webwatcher Review,
Thank you for your feedback. I’m glad that you find the information useful and I hope it is of use to those you’ve forwarded it onto.
My aim for this site is to communicate better financial management and keep people informed of changes in the economy that will impact on their finances.
The blog benefits from any input – positive and negative – so your feedback is really appreciated.
Thanks for stopping by,
Maureen