Up to 75 percent of first time buyers build up £6,000 worth of debt saving for a deposit on a property .
Alliance and Leicester figures illustrate that although 70 percent of would be first time buyers state that they are saving their deposit, 75 percent actually have outstanding debts . This of course is a contradictory position to be in.
There is practically no point in having savings while carrying debt, as interest charged on debts is almost always higher than the interest people receive on their savings.
In effect, this means first-time buyers are in fact losing money for every pound they pay into a savings account rather than paying off their debts. The average prospective first-time buyer is in £5,860 worth of debt .
And not only is this debt holding people back when saving for a deposit, but it could also affect how much money banks are prepared to lend for a mortgage .
This also affects the way in which many many lenders lend money. They use affordability calculations in order to assess how much they are able to lend someone. Such calculations are taken into account in respect to outstanding debt and the loan amount on offer reduced accordingly. So it makes great sense to pay off your debt prior to getting a mortgage .
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First Time Buyers in Debt
Mon, 02 Oct 2006
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