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Graduates more likely to pass the first home-ownership test

Miles Shipside, director and housing market analyst at Rightmove comments: “First-time buyers continue to be something of a rare breed in today’s market but our analysis reveals that higher education is currently the statistically most likely route to satisfying the homeownership dream. Those school-leavers who are set to embark on a university education this
autumn will be encouraged by the fact that further qualifications seem to be an important qualifying factor in getting onto the housing ladder.”

Nearly seven out of ten (69%) of those who expect to buy in the next 12 months are ‘grads’, educated to either graduate degree (39%) or post-graduate degree (30%) level, or equivalent. Despite the length of time spent studying – not to mention the associated costs of universitylevel education – those educated to graduate degree level appear able to seriously contemplate getting a foot on the property ladder sooner. The average age of a graduate prospective first-time buyer is 30, compared with an average age of 32 for a school-leaver. The average age for a post-graduate intending to buy for the first time is 33, though this is naturally skewed by the length of time studying, particularly for doctorate-level qualifications.

Shipside comments: “In today’s market, getting a degree under your belt is a common prerequisite among the constrained numbers who make it onto the housing ladder. Studying for a degree also seems to increase the chances of buying sooner. Joining the world of work straight from school may start your earning career a few years earlier, but in the current housing market it seems the downside is that it may delay being able to satisfy your home-ownership aspirations.”
Six in ten of prospective first-time buyers who are currently living with parents are graduates or post-graduates

Of all prospective first-time buyers who are currently living with parents, 62% are ‘grads’ compared to only 38% of other intending first-timers. Those that did not take up higher education may not have left the family home to go to University but have perhaps expressed their independence by leaving for the private rented sector. This drain on their resources,
especially with ongoing upwards price pressure in the rental market due to high demand, perhaps leaves them with a greater challenge to raise the substantial deposit required to get onto the housing ladder. Rightmove’s research finds raising enough of a deposit remains the most common single biggest concern among first-time buyers.

Shipside comments: “Some grads get ahead in the first home-ownership stakes by returning to the family home after their university gap, or perhaps, in these difficult times, some never flew the nest at all. The burden of student debt or the desire to buy perhaps means that there are fewer options to rent in the private sector, and the most practical outcome is to return from their recent student digs to their former school-time bed.”

The average deposit for a graduate or post-graduate first-time buyer is around £35,000, compared to £25,000 for ‘non-grads’. With lenders demanding higher deposits to get a mortgage, and lower loan-to-value advances attracting lower interest rates, this puts ‘grad first-time buyers’ in a better financial position.

Shipside observes: “With the bulk of those still living with parents being ‘grads’, one benefit of a few more years in the family home could be a larger deposit. This perhaps helps their final jettison from the bosom of the family home.”
30% receive a family contribution towards the costs of buying, with only 24% of ‘non-grads’ being assisted

Assistance from the ‘Bank of Mum and Dad’ has been well documented in helping aspiring first-time buyers raise the substantial deposits now required to obtain a competitive mortgage offer. ‘Grad first-time buyers’ also benefit from greater financial assistance from family members with their future house purchase. 30% of them state they will be the recipient of
some form of family financial assistance in building their deposit, whereas only 24% of ‘nongrads’ are expecting a contribution.

Shipside adds: “Some of those that have achieved ‘grad-status’ are not only taking advantage of the parental roof as a pre-step onto the housing ladder, but are also the greater beneficiaries of a financial leg-up towards the costs of getting there. It seems some return to the family home for cheaper accommodation, and then some are helped by a withdrawal from the family coffers to assist their final exit. Whether it’s a parting gift or a parting shot to get them to finally leave the family nest, it helps them both raise a higher deposit and means graduates buy their first home younger than ‘non-grads’. These are testing times for all first-time buyers, though in the current credit-strapped housing market, it seems that today’s grads will be making up the bulk of tomorrow’s first-time buyers.”

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2 thoughts on “Graduates more likely to pass the first home-ownership test

  1. People investing for the first time are likely to be closer to the end of paying off their student loan debt – it is a good idea to get your foot in the door as early as possible (if you can manage a long-term financial commitment). It will probably be best to invest in a relatively cheaper home, such as the nice units on offer at The Garrison Fort York which can then be sold and upgraded a few years later.

  2. mark smith says:

    Interesting article..
    I don’t see an increase in first time buyers until mortgage companies believe in the market more. In particular lowering how much of a deposit is required. I don’t see them going back to the good old days but lowering deposit would definitely help.

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