Majority of first-time buyers have debt

Posted: 29 Sep 2006 08:51:16 GMT

Three-quarters of potential first-time buyers currently have debts outstanding while they are saving for a deposit.

Three-quarters of potential first-time buyers currently have debts outstanding while they are saving for a deposit on their first home.

Seven out of ten potential buyers claim that they are actively saving for their deposit, but the majority have outstanding debts averaging £5,860, according to a report by Alliance & Leicester Mortgages.

First-time buyers with outstanding unsecured personal debts hope to purchase their first home during the next two years, but the study of UK first-time buyers advises people to get out of the red before attempting to get a foot on the property ladder.

The most prudent potential buyers in Britain were in the east of England, with debts of almost £4,210 each, whilst first-time buyers in the Midlands have average debts of £6,870. Despite the high cost of living, Londoners had an average level of debt of just £5,350.

Alliance & Leicester director of mortgages, Stephen Leonard, said: "Many lenders now use affordability calculations to determine how much they can lend someone and these calculations take into account outstanding debt and reduce the loan amount on offer accordingly. It's important to keep up with your payments as any missed payments or defaults could impact on your ability to get a mortgage later on."

Mr Leonard added that he would advise first-time buyers to try and pay off outstanding debts before trying to get onto the housing ladder.

The UK currently has a consumer debt of around £1.2 trillion and, as house price increases continue to outstrip wage inflation, affordability is becoming a major factor for first-time buyers.

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