Graduates fail to make grade in overheated housing market

Soaring house prices have led to 63 per cent of people with a university degree not owning their own home, while 10 per cent say they cannot ever imagine being able to afford a mortgage.

The survey, which was carried out by pollsters YouGov on behalf of Scottish Widows Bank, also revealed that unaffordable property is not just an issue for recent graduates, with a fifth of those who left university more than six years ago claiming they fear they will never be able to buy their own home.

Michael MacKenzie, 24, graduated with a degree in medicine from Aberdeen University last year and is now a junior doctor at the city’s Royal Infirmary.

He said he would like to get on the property ladder, but the debts he accrued in his days as a student have made it a difficult ambition to achieve.

Dr MacKenzie said: "I’d like to get something because I see it as a good way of not blowing all my money and instead tying it up in a fairly solid investment.

"My aim is still to get a place, but the timing of it has been put back by the fact that I’ve got an overdraft and other debts that I have to pay off. Once I do that I’ll be in a better position to pay all the fees and other costs involved in buying a place."

The study prompted calls for the Scottish Executive to do more to tackle the problem of student debt. Overall, 14 per cent of 25- to 30-year-olds told the survey they cannot imagine being able to afford a property, compared with 6 per cent of under-25s.

At the same time, 19 per cent of those questioned thought it would take up to ten years before they were able to get on to the property ladder. Just over a third said they wanted to pay off their student loans before they bought their first home, while two-thirds said they were finding it difficult to save for a deposit. About 14 per cent of graduates expect to get married before they buy a home, while 17 per cent of those over 25 said they would not have gone to university if they had known it would prevent them from buying a property.

Among those graduates who had managed to get a mortgage before they were 30, about a fifth had had to borrow money from family or friends to finance their deposit, while a quarter were given money for it.

Fiona Hyslop, the SNP education spokeswoman, said that unless ministers act, long-term consequences for the Scottish economy were enormous.

She said: "Young people saddled with debt suffer individually but are also a drag on the economy. We have to make sure they are not burdened down with debt in the first place, which is why we would replace the student loan system with grants. The Executive says that the economy is their number one priority, but they don’t seem to realise that graduate debt prevents young people from contributing to the economy or wanting to start up their own business. By lifting students out of debt, we will kick-start the economy. Ministers are ignoring this issue at their peril."

Murdo Fraser, the Scottish Tories’ lifelong learning spokesman, said the introduction of top-up fees, which will allow universities in England and Wales to charge students up to 3,000 a year, would only make the debt problem worse. He added: "People leaving university and wanting to start a career, buy a property and maybe start a family will find it increasingly difficult to do so in the future."

Melanie Ward, the president of the National Union of Students (NUS) in Scotland, was not surprised by the findings.

She said: "Graduates are supposed to be high-earning people, so if they can’t afford to get a mortgage then how can anyone else? If you expect people to pay for their own education and leave university with an average debt of around 13,000 in Scotland and even more in England, then it’s bound to have a major effect on their lives when they graduate.

"It means people’s priorities change when they leave university because their main priority is to pay off their student debts before they get a mortgage and think about starting a family.

"The situation is only going to get worse and the government has to take account of the problems it causes."

A spokesman for the Scottish Executive insisted that ministers had taken steps to ease the financial burden felt by students. He said they had increased the salary threshold for the repayment of loans from 10,000 to 15,000 and that since 2001, students from low-income backgrounds have been able to receive up to 2,150 of their living cost support in the form of a non-repayable bursary.

"The Scottish Executive has a strong record on supporting students throughout their studies," the spokesman said.

But Murdo McHardy, a senior manager of product development at Scottish Widows Bank, said more needed to be done to prevent the student debt problem from getting worse: "It’s a worrying prospect to think that so many graduates are so disillusioned about their prospects of owning their own home.

"As it stands, this generation of graduates could be struggling to get on to the property ladder well into their thirties or even forties and, unfortunately, the situation is only going to get worse. Student debt is on the increase and this, coupled with the huge rise in house prices, is making it impossible to save an adequate deposit."

A spokeswoman for the Council of Mortgage Lenders said more banks and building societies were offering special deals for graduates to help them get on the property ladder. "There are quite a range of flexible options out there," she added. "Lenders offering graduate mortgages offer them in the expectation that their income will rise as their careers develop. It’s also true to say that we’re likely to see even more innovation among lenders in the future because graduates are coming out with higher and higher debts."

CASE STUDY: FIONA GRIFFITHS

LIKE thousands of young people across the country, Fiona Griffiths would love to get into the property market.

And, while increasing property prices in her home city of Glasgow act as a clear disincentive, it is the fact that she is a graduate that is the main barrier to her achieving her ambition.

The 22-year-old left St Andrews University in the summer, having gained a degree in Italian.

After four years of study, she has accumulated thousands of pounds of debt - money that in other circumstances she would be putting towards her first flat.

Ms Griffiths, who estimates that she has debts of about 8,000, yesterday said the day when she would take possession of the keys of her first home was a long way off.

She said: "The price of houses at the moment is a major problem. In the past two years, prices have just been shooting up and it’s really difficult to see how I could afford to buy anywhere.

"I’ve also got an overdraft, credit card bills and other debts that I’d like to pay off before I even think about getting a mortgage."

Like many other young people considering taking out a mortgage, Ms Griffiths said she had already dismissed the idea of buying a place on her own and would instead be looking to get a mortgage with her boyfriend.

"It’s the only way I could possibly afford it," she said.

"I couldn’t afford the re-payments on my own, so it makes sense to share the cost with someone else."

And while she acknowledges that the situation she finds herself in is far from ideal, Ms Griffiths predicts it will be even harder for future generations.

She said: "The problem of student debt is only going to get worse and I honestly can’t see how graduates in ten or 15 years will be able to afford anywhere."