Figures released this week from the National Association of Estate Agents reveal only 3 per cent of homes sold in June were to buyers aged 18 to 30.
Research from Experian, the global information services company, suggest this could be due to young homebuyers severely overestimating the affordability of mortgages.
The NAEA figures mark a steep fall from last August, when the age group made up 12 per cent of homebuyers.
Experian found that a third of all would-be 18-29 year old buyers surveyed admit they are finding it difficult to budget, and a quarter had to dip into their overdraft in the last month.
Research also suggests that many young homebuyers may be guilty of complacency when it comes to getting their credit score and financial situation in order. One in ten (9 per cent) do not plan to prepare their finances before their mortgage application, while another fifth (19 per cent) only plan on preparing a month prior to their application.10
Only a third (34 per cent) plan to clear outstanding debt before applying for a mortgage and under a fifth (18 per cent) plan to pay down their borrowing, both of which would improve their credit scores.
Experian spokesman Peter Turner says it’s vital for young people get their financial situation in good shape.
“Improving your credit score is critical for younger borrowers, many who may not have built up a sufficient credit history or may be unaware how their past repayment affects future borrowing.”
Experian CreditExpert’s tips for getting the best mortgage deal:
1. Know your budget. As soon as you decide to look for a property, scrutinise your last few months’ outgoings carefully to understand your spending habits. Are there things you could do without to finish each month with cash in the bank?
2. Know what you can really afford. Visit a broker or use an online mortgage calculator to work out your likely repayments. Importantly, play with the interest rate settings to see if you could afford repayments if rates rise by 1%, 2% or more.
3. Make sure your credit report is up to date. As well as checking your outgoings, you should also check your credit report, which includes a record of all your borrowing over the last six years. Ensure everything is accurate and up-to-date.
4. Does your credit score need work? Experian Credit Score is a guide to help you understand how a lender might score your credit worthiness. If it’s lower than you expected, ask the experts for help and ensure your credit report paints the best picture possible before you make your application.
5. Build good behaviours. Finally, from now until your application, try to appear like an ideal mortgage borrower. Show you can make it through several months with a slight surplus. Don’t take out additional borrowing and try to demonstrate you can comfortably manage any outstanding credit commitments you have.
