After the endless days of drinking, waking up on strange sofas and possibly even a couple of lectures, most graduates look forward to starting life in the big bad world. New job, new horizons, new home? For this summer's university and college graduates, the race for paid work is well underway. And with each facing an average debt of £11,830, finding something that actually makes use of your academic qualifications is a pipe dream compared to the chance to earn regular cash.
And just when you thought the days of bunking down on a mate's sofa were in the past, you can expect to make good use of spare rooms and settees as you turn to established friends and family before finding a place of your own. Even if your gainful employment pays well, the chances are it will be a long time before you can save enough for a deposit to get a first foot on the property ladder. Welcome to the school of hard knocks.
The young ones
Such is the frustration of graduates struggling to buy property that almost a fifth of those aged between 25 and 30 say they would not have gone to university had they known it would prevent them being able to buy a home. The depressing revelation is from a study by Scottish Widows Bank who say that two thirds of university graduates under the age of 30 in the UK still do not own their own home, with one in ten saying they cannot imagine ever getting onto the property ladder. Just under one in five believe it could be up to ten years before they can afford to buy their own home and one in seven believe they are more likely to get married before buying their first home
'It's a worrying prospect to think that so many graduates are so disillusioned about their prospects of owning their own home,' says Murdo McHardy of Scottish Widows Bank. 'As it stands, this generation of graduates could be struggling to get on to the property ladder well into their 30s or even 40s 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; moving to an area where houses are cheaper is an option but should our brightest prospects really be expected to compromise their career plans to put a roof over their heads?,' he adds.
More than a third of those questioned said they wanted to pay off their student loans before buying their first home. The remainder said that saving for a deposit was the problem. Of those graduates that had made it onto the property ladder, a quarter received a financial gift from their friends or family to finance their deposits.
Mortgage school
It is sad to think that future generations may think twice about further education if it means missing out on a home of their own. Fortunately, all is not lost for freshly-minted academics. Mortgage lenders are doing more than ever to accommodate the needs of first time buyers, particularly bright ones with high future earning potential.
In the absence of a deposit, many borrowers opt for a 100% mortgage - borrowing the full amount of the property's value. Graduate mortgages work in this way but many offer slightly more than 100% of the property's value to provide some extra cash to cover the costs associated with buying a new home, such as stamp duty and legal fees. Don't be fooled into thinking that something with the word 'graduate' in the description is automatically the best product for you. You may find standard mortgages which offer a better deal. More worryingly, with 100%+ loans, if property prices drop, you will immediately find you have negative equity, where your mortgage is higher than your property value. Loans of this kind also tend to attract a Mortgage Indemnity Guarantee or Premium. Put simply, this is an insurance premium you pay for that pays out to your lender if you cannot keep up repayments on the mortgage. In short, these loans cost more and carry more risks so look before you leap.
Alternatively, some lenders offer special deals that accept your parents as guarantors. This means they agree to assist if there are any payment difficulties. Most lenders ask the parent to guarantee all of the loan but some only ask them to be guarantor for the element outside what their child can afford. Newly qualified 'key workers' such as nurses, teachers and police officers may be eligible for the government's Starter Home Initiative which provides help with deposits. Professionally qualified borrowers such as doctors or accountants may be offered preferable rates from lenders.
Now if all of this makes you want to run out to your nearest mortgage adviser, just remember the trick is to make sure you do your homework about the level of commitment which is right for you and overcome the temptation to borrow more than you need. Welcome to the university of life.
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