Most graduates will be coming out of university with their debts acquired over the course of their degree exceeding £25,000 which they do not have to pay back until they are earning over £21,000 every year. Most graduates won’t be earning anywhere close to this amount for several years after graduation with entry level jobs aimed solely at graduates in most industries rarely paying above £18-£20k per annum.
It’s for this reason that graduates who are looking to get an early start on the property ladder are beginning to worry that such a thing will not be possible. Guidelines that have been issued by the city regulator now indicate that student debts could go against those that are looking to apply for a mortgage.
The guidelines are part of the Mortgage Market review for the year. The new guidelines aim to put a tighter scrutiny on lending so that the recklessness that led to the economic crash in 2008 does not happen again. However, many students believe they are being unfairly punished for attending university and gaining a degree.
Alexander Brugess, the director of income protection for British Money, said that he believed there is nothing to worry about. He stated: “There appears to be a common misconception among students that anyone who has taken out student finance will have their loan discounted, but this simply is not the case.”
University tuition fees increased in 2012 with the introduction of the Coalition Government. The new Government decided to charge students a maximum of £9000 a year for their tuition fees. Recent reports suggest that 45% of those who graduate from university will not be able to pay back their student loans in their lifetimes.
The Building Societies Association advised: “We would urge all borrowers with student loans to be responsible, realistic and reduce their debt elsewhere as much as possible if they are thinking of applying for a mortgage.”
This advice is due to the fact that the Mortgage Market Review is putting more focus on a potential borrower’s outgoing funds in comparison to their annual wages rather than what outstanding debts they have already to their name.
If you wish to find out more about how student loan debt can potentially affect your mortgage application, call the Mortgage Express contact number to be put in touch with a number of third party organisations who can provide free and impartial advice about your financial situation.