Alan Cleary, Managing Director of Precise Mortgages
It’s usually only with the benefit of hindsight that you can make sense of things and see them for what they truly were. However, you’re sometimes given a warning about an iceberg just over the horizon and have plenty of time to change your course to avert disaster.
Take the situation facing ‘Generation Rent’ for example – those currently living in rented accommodation who believe they have little chance of becoming actual homeowners themselves because of high housing prices.
The recent Rental Housing for an Aging Population report from the government’s All-Party Parliamentary Group for Housing and Care for Older People throws the future dilemma facing this demographic into sharp relief.
According to the report, 22% of those aged over 65 are currently either private or social tenants, but this figure is predicted to dramatically increase in the coming years as owner-occupier numbers fall and the private rented sector continues to grow.
With people’s incomes typically halving after retirement, those in the private rented sector who currently pay 40% of their earnings in rent could have to spend up to 80% of their income on rent in retirement. This will particularly affect the millennial generation – that is those born between the early 1980s and the mid-1990s/early 2000s – with the report suggesting that around 630,000 millennials could face problems as they are unable to afford to buy homes and their pension income will not be sufficient to cover rental costs.
The report concludes that to meet the future challenges, the government will need an extra 38,000 homes a year for rent, totalling 1.1 million additional rental homes by 2050.
So, what can we do to avoid the ‘inevitable catastrophe’ the report claims will affect the pensioners of tomorrow? Well, as lenders, we can all play an important role in making sure we’re offering the products and criteria to help customers buy their own property, whether they’re a first time buyer, self-employed, want to take advantage of the Help to Buy scheme or have a less than perfect credit history.
Here at Precise Mortgages, we’ve thought long and hard about how we can make our residential mortgages as widely available as possible. We now accept applications from applicants aged between 21 and 70 (75 on referral) with a maximum term of 35 years, and our products are tiered to meet individual credit profiles, including those with CCJs, defaults, DMPs and missed payments. Customers can choose from a range of different repayment methods, including capital and interest, interest only and part and part, and we’ll calculate affordability based on the repayment method selected up to 85% LTV.
With more people working for themselves than ever before, we consider one year’s figures (SA302 plus tax year overview or HMRC tax calculation plus tax year overview), and zero hours contracts on secondary applicants. We’ve also beefed up our Help to Buy offering by making it available to customers north of the border in Scotland for the first time and now offer remortgages to help early adopters of the scheme make the transition to become more established homeowners.
With such a stark warning about the future, it’s vital that we help younger generations realise that buying a home can be a reality, not just a distant pipedream.