New 95% Mortgages Won't Help
At the annual Conservative party conference in early October, Boris Johnson announced proposals to reintroduce 95% mortgages for first-time buyers. At first glance, this appears a valiant effort to help young people get on the property ladder. But the reality is that, even if this does come to fruition, buying your first home will still be fraught with difficulty due to systemic problems in both the housing market and society in general.
I am 35 with two young children and pay £900 per month to rent my 3 bedroom semi-detached house in Essex. As a family, we have accrued a mountain of debt just to afford to live a normal life, taking into account the cost of rent, childcare and everyday living. Keeping up with all this has made it impossible for us to save a deposit. Even if we only needed a 5% deposit under these new proposals, it is still 5% of something that is far too expensive in the first place.
In addition, due to the debt that we, and probably a lot of other families like us, have had to take on, both mine and my husband’s credit ratings are wrecked. This is, of course, another obstacle to getting a 95% mortgage - you will no doubt need an impeccable credit rating.
The government’s new proposals do not address these key issues which plague Generation Rent. Rents are always too high and they are not being capped as in other European countries, and often people have to get into debt just to afford their rent. The UK also has one of the most expensive childcare systems worldwide. With average weekly childcare costs exceeding £250 per week for a full-time nursery place (and that’s outside of London), it’s easy to see that this is also a major problem and contributing factor to families getting into debt.
So the reality is that so-called millennials like myself are getting into huge amounts of debt to afford to keep a roof, owned by someone else, over our heads. And to afford extortionate childcare so we can go to work to earn the money which will then line our landlords’ and childcare providers’ pockets.
In the process, our credit ratings are ruined by the debt. So, even if we were able to scrape together somehow a 5% deposit after we’ve paid out for rent, childcare and everything else that is also too expensive, we probably wouldn’t have a good enough credit rating to get a 95% mortgage.
My husband and I are in a lot of debt which we are barely managing day to day. I had my two children at the ages of 28 and 30 - pretty standard I’d guess. Both our children attended nursery whilst we worked, earning what you’d probably class as a decent enough salary of around £30, 000 between the two of us. But all of our money pretty much went on childcare and rent, and often I had to use a credit card for the childcare fees.
We paid £250 per week for a full-time nursery place for our youngest, so around £1125 per month. Our rent at the time was £950 per month. So rent and childcare totalled £2075 per month - more than our salaries combined. Thank God then for 30 hours of free childcare, or we wouldn’t have been able even to afford food after that, let alone all our other bills.
And what a lot of other bills there are: food, petrol, car insurance, car tax, council tax, utility bills, TV licence, mobile phones and broadband, life insurance, prescriptions. And what if you want to also have some social life for yourself and your children, to take them out places and do fun activities and go for meals out? If you want any of that stuff but you only earn an average salary, you have to decide to either put the cost of these, or the cost of the rent and childcare, on credit - and there goes the credit rating, particularly if you get behind on payments because of trying to afford all this other stuff.
How on earth anyone can scrape together a deposit of any kind, I don’t know. With the average first-time buyer home costing £220, 000, a 5% deposit would be £11, 000. With a poor credit rating though, you’d need to either prioritise paying off all your debt, the difficulty of which will depend on how much you have (in our case, we’ll probably both be too old to get a mortgage by the time we’ve done this). Or beg, steal and borrow to get a higher deposit together.
And don’t get me started on pensions. Anyone I know of my age has received a windfall from the death of a relative or money from their parents to use for a deposit. I don’t know anyone who has saved their own deposit and has been able to buy their own home with it in their thirties. I’m sure these people do exist though; of course, there’s always a spectrum of differing scenarios, but unfortunately, my family and I are at the very bottom of this.
Some might argue we haven’t managed our money well, that we’re in debt because of this and that we’ve put things on credit that we shouldn’t have. Perhaps that’s true to a small extent, in the sense that we might have put a few takeaways or some clothes on the credit card when we wanted a small treat for the kids or us. But I’d love to show them my childcare and rent receipts. I’d love to explain that my kids have never been on holiday abroad, that we don’t own any flashy gadgets or eat out ever. Yes, we have two cars, but they are both 18 years old and often unreliable.
A lot of our debt has come from moving house, when you need to pay a rental deposit upfront (around £1500 the last time we moved), along with administration fees. We’ve had to pay double rent at times to secure houses, with timings rarely working out perfectly.
Yes, we took out loans to buy furniture and a new TV, which maybe we didn’t need. But it’s hard not to want something nice occasionally. When it’s impossible to buy these things outright due to all the aforementioned other expenses, it’s all too easy to turn to credit (before your credit rating is decimated, that is.) Much of our debt was taken on to consolidate existing debt, and it’s a cycle which often never ends.
We no longer pay childcare fees thankfully as the kids are both in school, but our circumstances have changed a lot, and we are now on a low income, trying to keep our heads above water with no end in sight with regards to paying off our debt. We have no savings whatsoever. My husband and I have resigned ourselves to never owning our own home, and I often wonder what the future will be like for us when we have neither a home that we own or pensions.
To afford to continue renting into our 70s, and without a pension to draw on, we will need to continue working until the day we die - we’ll never retire. It’s grim, but it’s our reality and I think there are others in the same boat as us. My main hope is that we’ll have at least paid off all our debt and might be able to afford a rusty old caravan to live in if the worst comes to the worst. We certainly won’t be able to give our children a house deposit.
I take responsibility for our situation to an extent, although I tried my best to earn as much as I could. My highest salary peaked at £32, 000 two years ago, but poor mental health put paid to this and I don’t think I’ll ever earn that much from self-employment.
I’m angry at the system though - at the government for not doing enough to limit rent, reduce childcare costs and the price of first-time homes, or increase salaries in line with how expensive everything has become in this country. Families like ours are slipping through these gigantic cracks in society.
So forgive me if I don’t whoop and cheer when the government announces pointless 95% mortgages. Forgive me when the fact that I’ve paid almost £100, 000 in rent over the last ten years and am now in an excruciating amount of debt overshadows any vain hope that this new scheme will be relevant to my family.
Millennials have been let down badly, so really the government should be the one asking us for forgiveness.
Written by Sarah Bones
Sarah is in the process of making a career change into freelance journalism from Higher Education. She likes to write personal essays, opinion pieces and features about various topics, including issues affecting women, parenting (she’s a mum to two young boys) and mental health.