Young buyers underestimate MMR affordability
Yesterday the National Association of Estate Agents revealed that just 3% of homes sold in June were to buyers aged 18-30, a steep fall from August last year when the age group made up 12% of homebuyers.
Under the Mortgage Market Review introduced in April mortgages are rigorously stress tested against an interest rate rise.
A third of would-be 18-29 year old buyers admitted that they currently find it difficult to budget, as 52% overspent last month while 12% had to dip into their overdraft.
Just one in ten (8%) have checked their credit score in the last six months.
Peter Turner, managing director of Experian Consumer Services for UK and Ireland, said: “These findings show just how important it is for young people to get their finances in the best shape possible in advance of a mortgage application.
“Interest rates have been low and stable for so long that the current generation of first-time buyers has never known it any other way.
“But as the economy improves, interest rates will inevitably rise, and could rise several times. It’s therefore vital that young people seize control of their financial situation to get themselves in the best possible shape.”
One in 10 (9%) 18-29 year olds are not planning to prepare their finances for their mortgage application, while a fifth (19%) will only leave a month to prepare.
Only a third (34%) plan to clear outstanding debt before applying for a mortgage, while under a fifth (18%) plan to pay off money already borrowed, which would improve credit scores and free up funds.
Experian CreditExpert advises young applicants to monitor their spending habits over two months to ensure they know what they can afford.
They should also ensure save surplus money in the months leading up to the application to appear an ideal, responsible borrower.
Borrowers can use an Experian Credit Score as a guide to how lenders may score credit worthiness.