July 9, 2014

Tim Wheeldon is joint managing director of Fluent Money


The last few years have seen a broad scope of different age groups and social backgrounds feel a strain on their finances, resulting in a shift in debtor demographics for financial advisers to consider.

This constantly creates new challenges for those in the personal finance sector as we assess and advise on the alternative routes for different lending groups.

What we are now finding is that although the recession might be over, our latest responsibility is to address the new, post-recovery issues facing British borrowers.

One particular instance of this is the current property market crisis, which has shifted focus towards the vulnerable 24-35-age bracket, or ‘younger generation’.

The rapidly heating housing market has been the subject of public speculation for months but lately the figures have seemed particularly bleak for young people hoping to get their foot on the property ladder.

In a recent study, 87% of those asked stated the ability for first-time buyers to buy a home was the top housing concern nationally, reflecting the anxiety of young would-be homeowners in the UK.

What makes this current predicament a particularly post-recession issue is that the problem stems from both financial insecurity and renewed optimism.

This is because although the Bank of England cites excess debt from buying houses as one of the great threats to the nation’s economic stability we are also experiencing a rise in appetite amongst first-time buyers, with those aspiring to own a property rising by 3% (to 68%) over the last year.

As a result of this paradox – higher aspirations with lower spending power – regulators, advisers and brokers must present a range of different options to first-time buyers requiring financial support. Although Help to Buy has played a role in supporting first-time buyers even this scheme is being reevaluated – with the expectation being that some of its measures will need to be adapted in order to help cool the market.

We are also noticing some troubling trends as borrowers seek out unsustainable alternatives to borrowing.

These include young people taking out larger loans to find homes in more affluent areas and parents taking out mortgages that will outlive them so that children can get a head start.

This looks to be the start of an ongoing issue for young buyers, with borrowing set to become the norm for those purchasing their first property. It is therefore important that we remain aware of all the different avenues available to young borrowers and maintain a balance between managing expectations and ensuring that those looking to buy can still realise their dream of owning a home.

In order to prevent a gulf widening between the wealthy or those with additional support from families with those that are less well off we must explore the lending schemes available with minimum long-term financial impact on those planning for the future.

What the overheating housing market does highlight is that emerging from a financial crisis brings with it a whole host of new financial concerns, especially when you are planning for the long-term.

It is only with patient, honest and absolutely transparent guidance that the financial services sector can prepare younger borrowers for the challenges ahead.




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