Revolting Students

Yesterday saw some major disruption in London with Students protesting against the coalition government's plans for student tuition fees.  The majority of people protested peacefully with a small number of irate people going on the rampage at the Conservative Party's headquarters.  I'm not going to give my personal views on the protesters or their cause, except that I think we all have a right to protest in our democracy and feel that this is right and proper.

I'm thinking a bit more long term from a personal perspective as a mortgage broker.  My business has survived (and a couple of years ago thrived) on the back of two areas, remortgage business and first time buyers.  Not all my clients fall into these categories of course but they have provided the mainstay of the business.  Without the first time buyers I won't get those who want to move up the property ladder to their second and third homes and so on.

In September loans to first time buyers were 6% lower in volume than in September 2009 (according to the Council of Mortgage Lenders -CML) and it has been in the news constantly that first time buyers are finding it harder and harder to get onto the property ladder.  I don't have the stats for previous years but do recall that the number of first time buyers as a percentage of the whole market has been falling over the last two or three years.

So agree or disagree with the proposed legislation in coming years we are going to see graduates coming out of university and finding themselves with an extra 9% tax to pay at a time when it is already very difficult to raise that all important deposit on your first home.  Presumably they will still have student loans on top of this extra tax burden so I can't see the first time buyer market thriving in years to come.

Another issue is how will the mortgage lenders deal with this new tax bracket in their affordability calculations?  Traditional methods of calculating how much to lend have been three times salary or four times salary with deductions for loans etc taken into account.  More recently the high street lenders have built affordability calculators which we brokers use to determine how much our clients can borrow.  The affordability calculators are also available directly on the lenders' websites. 

I feel that in the already tight lending environment in which we find ourselves the graduates of the future are really going to struggle to get that foot on the ladder.