The Brexit vote has come and gone, but the full effects of that vote have yet to be realised. But Brexit isn’t the only factor creating uncertainty for prospective homebuyers. Despite the latest cut in interest rates, many people may find it increasingly difficult to buy a house. This isn’t to suggest that if you are stumbling over obstacles to your dream of homeownership, you might as well give up. However you might need to make an adjustment in your plans.
Why that uni education may make it harder to become a homeowner
It is bitterly ironic that a uni education is supposed to be a key to success, but can actually make it more difficult to achieve one of the major hallmarks to success: homeownership. And as tuition and living costs rise, student debt will become even more of a hindrance to homeownership, at least for many young adults.
The main problem is that the costs of a uni education have risen dramatically over the last couple of decades, and show no signs of reversing that trend. As a result, many graduates saddled with huge student loan debts, combined with the disparity between rising costs and stagnant wages, find themselves falling behind on payments and / or relying upon overdrafts just to cover regular expenses. Even those who avoid getting into a credit hole by eschewing credit are finding that having little or no established credit history can hurt them as much as being overextended. The result is a perfect trifecta that drops the graduates’ credit scores, making it difficult if not impossible to qualify for a mortgage loan.
While that uni degree is generally considered an essential prerequisite to earning enough to fall into the middle-class, a study by Amigo Loans showed that of 16,000 people whose applications for mortgage loans had been rejected, applicants who had attended university were ten percent more likely to have their applications rejected. To compound the problem, having a loan application rejected tends to further damage an already poor credit score.
And house prices aren’t going to plummet any time soon
According to data obtained by leading lender Halifax, average UK house prices fell by one percent between June and July of 2016, which lenders and agents obviously hope to be an indication of a future trend. Not to dampen anyone’s hopes, but the average house price in the three months leading up to July 2016 was 8.4% higher than during the same period the year before. As is typically the case, prices rose more dramatically in the affluent boroughs such as Islington and Hammersmith & Fulham, while prices dropped by 9.2 percent in the wealthiest neighborhoods in the City of London and Kensington & Chelsea. A realistic prediction would be for the average increase in house prices to slow somewhat, but not for average house prices to decrease significantly, barring a crash in the market.
Still, it’s not all bad news for prospective homebuyers, even those people whose current financial situation prevents them from buying a house.
Stay informed about your choices
You might not be able to do much about the prices of houses, but there are ways you can improve your chances of qualifying for a mortgage loan and keep your costs and payments at an affordable level. To begin with, you need to be realistic in your expectations, both about the home you can reasonably afford and the way you pay for it. If you’re on a tight budget and / or have a marginally good credit score, you’d be wasting your time shopping for a home in those wealthiest neighborhoods. Despite the fact that house prices in those areas have dropped more than in other areas, the prices are still beyond the reach of all but the wealthiest buyers. Look instead in the more modestly-priced areas that still provide some aesthetic appeal and security, but without the high cost of being in a prestigious locale. Better that you start your climb up the property ladder on a lower rung than trying to leap all the way to the top.
Even before you begin shopping around for a house, take some time and make certain your finances are in order, that you don’t have an excessive debt burden, that you have sufficient savings to cover the initial costs of homeownership. These frequently overlooked costs include the various expenses directly related to the purchase and the cost of moving your possessions into a new home.
Next, you need to begin researching to see which lenders offer the deal that best fits within your budget. Tightening credit requirements notwithstanding, the mortgage loan industry is highly competitive, and different lenders structure their mortgage loans to attract customers, with many offering discounted rates, some flexibility in loan terms, and little-considered but important “perks”, such as exemplary customer service throughout the term of the loan, rather than limited only to the application and processing phase.
Gathering the information you need from multiple lenders can be quite a task, especially since lenders will emphasise only the best elements of their businesses. A simpler method is to seek out an independent site that provides a wealth of moneysaving tips and information to help you better manage your personal finances. And for those who think they may be ready to buy a house, Readies provides tools to compare mortgage lenders (as well as numerous other types of lenders). It’s important to be informed about the choices available to you.
Getting into the habit of better financial management will go a long way toward helping you achieve your goals, whether or not those goals include homeownership. Even if you are faced with seemingly insurmountable debt, there is a way out. Owning a home may be unfeasible right now, but it doesn’t have to remain an impossible dream. The only way to make it possible is to begin taking action now.