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BBC FOI on student loans: "Student loan payments play havoc with mortgage affordability"

ended 02. July 2024

With data from the BBC secured via an FOI revealing that nearly 1.8 million people are now in at least £50,000 of UK student debt, Newspage asked brokers how student debt is impacting younger buyers’ mortgage affordability. Is it a growing problem as more people graduate with ever more debt? Is it making an already hard situation for aspiring first-time buyers even worse? Their views can be found below.

7 responses from the Newspage community

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Justin Moy
Managing Director at EHF Mortgages
Student loan payments play havoc with mortgage affordability, affecting many very young professionals trying to get their first step onto the property ladder. Mortgage affordability is reduced where outstanding finance and regular commitments are to continue, and with many graduates with over £50k indebtedness, their property prospects will be severely affected for decades to come. Once mandatory student loan costs, pension contributions and basic living costs such as a car are factored into a borrower's finances, there is not a lot left for their new home. No one can take your education away from you but it can take years and years to pay for it.
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Riz Malik
Independent Financial Adviser at R3 Wealth
Many borrowers are surprised that lenders takes into account student loan deductions when calculating affordability. Maybe if more was done to educate young borrowers with little financial knowledge then this could impact their decisions. Financial literacy needs to improve in this country as we do little to equip young people when they leave school. They need to enter higher education with not just their minds but their eyes wide open.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
While student loan repayments have, for most borrowers, minimal impact on their mortgage affordability, rising student loan debt is a growing problem and concern. With over 1.8 million owing over 50k and facing interest rates over 8%, we will see some of these debts taking a lifetime to repay. The costs of undertaking degrees are hanging over many households like the sword of Damocles.
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Ross Lacey
Director & Independent Financial Adviser at Fairview Financial Management
Student loans do have an impact on mortgage affordability. However, higher payments correspond with higher earnings as the payments are based on a percentage of earnings above certain thresholds depending on the repayment plan the student loan is on. We deal with lots of first-time buyers and they are often surprised that student loans are factored in and can reduce the available borrowing, as there seems to be a misconception around lenders disregarding student loans. So, there's definitely some education needed there so people know what to expect.
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Dariusz Karpowicz
Director at Albion Financial Advice
Student debt is mounting in the UK and it's a real problem for aspiring homeowners. It's making an already tough situation even worse for first-time buyers. When you don't earn enough, student loan payments don't kick in, but when you do earn enough, those payments affect your affordability by lowering the amount you can borrow. It's a catch-22. The impact of student loans on monthly income assessments can significantly reduce the mortgage amount lenders are willing to offer, making the dream of homeownership even harder to achieve.
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Simon Bridgland
Director at Charwin Private Clients
It’s not the greatest start in a person’sfinancial life to have a mountain of debt to climb. These individuals will in the main never pay off the money borrowed and will forever have this ball and chain limiting their future borrowing capacity for home ownership and building a secure future for them and their loved ones. It is adding fuel to the already blazing inferno of issues affecting millennials and Gen Z.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
Being a boutique mortgage brokerage dealing particularly with barristers and other legal professionals, we see some pretty hefty student loans and repayments. However, being in the profession that they are, many of these borrowers are, or will be, earning good money and these debts are very much an investment in their future practices. The benefit of student debt repayment, as far as mortgage affordability is concerned, is that the repayment is set based on your income, so when your income is low so is the repayment and only as your income grows does the repayment increase. The overall impact on mortgage affordability is therefore low. However, as the balance of student debt increases it could present a problem for some lenders using a debt-to-income ratio as part of their credit scoring; a large student debt, but low relative income, could negatively impact your chances of passing some lenders credit scores.