Rising university costs are making it even harder for graduates to step onto the property ladder - despite Chancellor Gordon Brown last week announcing a helping hand to first-time buyers. So what can they do? Jane Hall reports. Spring is traditionally the start of the new house buying season. Taken with a renewed feeling of confidence and hope after the winter, hundreds of thousands of people will, over the next few weeks, venture into their nearest estate agent to see what's on offer. Robert Leeman is no exception. Anxious to make the move from renting to owning, he has already been to view a number of properties on Tyneside. But Robert's initial optimism has already waned. For he has come to realise his dream of owning a home is likely to be many years away. At 26, Robert is a member of a club he would rather not be enrolled in. He is one of the new breed of 18 to 34-year-olds who, thanks to spiralling house prices and unavoidable debts, can't afford to get on to the property ladder. 
Five years at university in Newcastle and Germany, gaining both a BA Hons and a MA in transportation design, has left Robert shouldering substantial debts. And, while he has worked for the past two years as a lecturer in transportation design at his old university, Northumbria, he estimates it will still take him another five years to pay off bank debts, with his student loans likely to remain a millstone around his neck for even longer. While Robert is making financial headway and admits he is better off than many his age, he was forced to turn down a chance to work as a car designer for Toyota in Japan, prior to joining Northumbria, because he couldn't afford to make the move to the Far East. Robert is currently renting a two-bedroom flat in Heaton, Newcastle, with a friend, at a combined cost of £500 per month. He would rather channel the money into a mortgage but is unable to scrape together enough for a deposit. His parents are not in a position to help him financially or to act as a guarantor on a home loan. While he could secure a 100% mortgage - he has made enquiries about a new five-year fixed-rate deal at 5.50% from Newcastle Building Society, aimed at those who are unable to raise a deposit and have no guarantor - he is unwilling to overstretch himself. He says: "I have worked it all out. It is going to be a good five years before I pay off my bank debts, and it will be years to come before I clear the student loans. I'd like to think I could buy a home by the time I'm 28 or 29, but who knows? The system is set up for people to have their own pension and savings and to have policies in place to cover things like medical and long-term care and further education, so you don't have to rely on the state. "It is reasonable that people should pay for their further education, and students should see the importance of it and take responsibility. But it is leaving people very badly off at the end of it. "The situation with people my age at the moment is that they either have to buy with friends or ask their parents for help. I'm not in a position to do either. My position is that I have to clear my debts." Robert could afford to spend up to £90,000 on a home but realises the longer he waits to buy the less he may get for his money. When he does eventually buy he will almost certainly have to rent out a room to help with costs. He says: "When I was younger, I envisaged reaching 26 and having a good job, a nice car and a home. "I am worried about the future. I am trying to set myself up - and I am trying to live within my means. "It's taken me a longer time than I wanted to feel like I'm grown up and not still feel like a student. "And it's going to be even longer before I can start saving and get a tax-free Isa or life insurance and feel financially secure. The future is scary." The situation could be set to become even more frightening from this September, when universities in England and Northern Ireland will be able to charge tuition fees of up to £3,000. This is a 155% increase on tuition fees paid by students during the current academic year. With this figure added to the estimated living costs and further course charges for an average student, this year's university intake cannot expect to graduate without paying £30,105 - according to the National Union of Students. With the average deposit for a typical first-time buyer home now £23,067, those graduates faced with the increased tuition fees could be at a significant disadvantage when attempting to buy. These figures offer a rather negative outlook for recent and prospective students - a position not helped by a recent Government report which revealed a generation of graduates will be paying back university debt until they are at least 36. They will begin their adult life saddled with 15 years of debt after the £3,000-a-year tuition fees are introduced. That is more than double the seven years it currently takes to clear their slate. But shocking as it is, this could still be an underestimate. High street banks say many students have to supplement their state loans with commercial ones in order to meet their living costs. It's no wonder that record numbers of first-time buyers are being forced to ask their family for financial help to step onto the property ladder. According to the Council of Mortgage Lenders (CML), nearly half of young people have been forced to turn to relatives for assistance, which sometimes runs into tens of thousands of pounds. Much of this help may itself be equity from housing. The CML also says that, over the past decade, the proportion of first-time buyers whose deposits were higher than their plausible savings has jumped from under 10% to nearly 50%. This trend is putting pressure on parents and other relatives, usually grandparents, who typically remortgage or dip into their savings to raise the money. The CML figures highlight the huge financial gulf that has opened up between young people with generous parents and those with relatives who cannot afford to help - or refuse to do so. A typical `assisted' buyer under 30 earns £25,000 but is able to put down a deposit of £34,000 and buy a home of £136,500. But a first-time buyer without family help must be on a much higher salary, typically £34,500, to buy. Despite earning more, he or she can typically afford a deposit of only £7,000 on a home worth £118,500, which is likely to be smaller and in a worse area. Last year the number of first-time buyers fell to its lowest level since 1980. Just 320,440 got on to the property ladder. That is less than half the number of those who managed it in 1999 when they needed under £60,000 to buy a home. James Tatch, CML senior statistician, says: "For some homeowners, helping out their children with a mortgage deposit may represent an efficient use of funds, in the light of low returns on alternative investments. "For others, the assistance may not represent an investment decision so much as a case of the family 'pulling together' to enable the younger generation into home ownership. "We do not know what effects any of this will have on borrowing patterns of the future. While older generations are able to raise funds from converted equity and other sources, the assisted route remains a viable option for many young first-time buyers with willing families. "But if, for whatever reason, these sources
dry up, the importance of unassisted first-time buyers is likely to increase, and the affordability constraints they face will be brought into sharper focus." In a bid to rectify this, Chancellor Gordon Brown last week announced in the spring Budget an enhanced shared equity scheme which will see first-time buyers having to find as little as 25% of a property's price, with the rest split equally between the Government and the mortgage lender. He also raised the stamp duty threshold to £125,000 - a move he claimed would help an extra 400,000 homebuyers. But Stephen Leonard, director of mortgages at Alliance & Leicester, says of the increase: "Whilst this is a step in the right direction and recognises the plight of first-time buyers who are the lifeblood of the housing market, it represents only a 4% increase. This is not enough." ********** Tips for first-time buyers There are a number of ways first-time buyers could help finance their purchase. Club Together An obvious way to get on to the housing ladder is to join forces with a friend or relative. A number of financial institutions are now offering so-called guarantor mortgages where a parent or other close relative's finances are taken into account, allowing the borrower to obtain extra cash, thus stretching their buying power. The drawback, however, is that you are jointly liable for the loan, so you will have to make repayments for any party that fails to pay. Newcastle BS's guarantor mortgage is fixed at 5% for five years and offers a facility for first-time buyers to borrow more than standard income multiples allow. This mortgage is aimed at buyers who are earning over £15,000 and expect to see a significant increase in their salary. 100% Mortgage A 100% mortgage will require no deposit and will normally offer free valuation and no higher lending charge. Some will also offer free legal fees. Portman, the Yorkshire Building Society, the Co-operative Bank and Newcastle BS are just some of the names offering such deals. Newcastle's new 100% mortgage is set at 5.50% for five years, while the Co-operative Bank has a deal set at 5.14% for three years with free valuation, a flexible option and no higher lending charge. Graduate Appeal Many lenders like to attract graduates, with the most generous deals offered to those in professions that provide a predictable career and salary, such as accountancy, law and teaching. HSBC has a special 100% graduate mortgage available for up to five years after leaving university. It allows you to borrow up to four times your annual salary, with reduced repayments in the first three years with the banks HomeStart mortgage option. Fixed, discount and tracker rate options are available and there are no extended tie-ins. You need to hold, or open, a Graduate Bank Account with HSBC and have your salary paid into it. Parent Power First-time buyers often turn to their parents for help with raising a deposit. Asking a parent to act as a guarantor for a loan can be helpful as it means the lender will base the size of a mortgage on a parents' income, provided it is sufficient to cover the parents' own mortgage as well. However, not all lenders will allow this arrangement. New Builds Some developers offer schemes to help first-time buyers. Barrett has its `£99 down and move in' package, and you could get stamp duty and legal fees paid as well as £10,000 cashback. Shared Ownership This type of scheme can be a useful leg up if you are a struggling first-timer - if you meet the strict criteria normally laid down by the local authorities or housing associations that offer them. Most deals are aimed at those in social housing or who are `key workers' with jobs in the public sector such as nursing or teaching. Chancellor Gordon Brown last week announced an improvement to the shared equity scheme, first announced in the Pre-Budget Statement, when he said buyers would have to find 75% of a property's price, with the rest split equally between the Government and the mortgage lender. But the Government is now to pilot a scheme under which buyers will have to find as little as 25% of a property's asking price. Housing associations, local authorities and builders are being invited to offer the scheme. However, the Royal Institution of Chartered Surveyors says the scheme will help less than 1% of first-time buyers. Interest-only Option Opting to pay only the interest on a loan does not improve chances of getting on the property ladder. But it does ease the burden of repayments in the early years. | 
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