Recent trends have indicated that people in their early to mid 20s are no longer the principal demographic to be purchasing a property for the first time in their lives. Young people these days tend to prefer waiting until their mid 30s before taking out their first home loan.
Experts believe there is a variety of reasons why this change has occurred. The main reason is that the late naughties Global Financial Crisis has driven banks to greater scepticism over who they lend money to. Banks are more careful than ever before of who to deem as a trustworthy client who won’t be going through overt struggle to make loan repayments.
Some years ago, a minor blemish on your credit file wasn’t a big deal. These days, anything less than perfect could be seen as an unforgivable sin. This is why it has become so important, particularly for youngsters, to make sure they avoid maxing out their credit cards or failing to pay off their student loans on time.
Banks in general feel that if you are in the mid 30s bracket of your youth, you are a tad more likely to have reached financial maturity than in earlier years. It’s not that this weren’t the case prior to the Global Financial Crisis, basically banks could have afforded to take more of a risk back then whereas now, they can’t.
Another reason for this shift is that banks are beginning to require greater deposit amounts before lending. It follows that people in the 30 plus age brack are more likely to have the sorts of chunky deposit amounts saved aside than those in their 20s. The bigger your deposit, the smaller your mortgage. That makes it easier for the bank not only to trust you, but it gives you more flexibility to refinance later on with greater ease, should the need arise.
Further to this, people are no longer settling down and getting married in their twenties as frequently as was the cultural norm going back some decades. Marrying later means youngsters feel no sense of urgency to exercise financial responsibility early on in life.
That being said, there is no issue with youngsters applying for home loans. In fact, the more 20 year olds get back into the business of taking out home loans the sooner this tendency for older people to be the principle first home buyer demographic will change!
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