More than one in five millennials who had been saving for their first home are diverting the money towards coping financially day-to-day, a survey has found.
Some 22% of 26 to 40-year-olds who had been hoping to get on the property ladder will be dipping into their savings instead, according to the research from credit checking company TransUnion.
The housing market is grinding to a near halt as people put off their moving plans. Lenders are giving extensions on mortgage offers, to enable those who had been on the brink of moving to do so at a later date.
Some lenders have also been temporarily restricting the range of mortgages they are offering to new borrowers, particularly affecting those with lower deposits – such as first-time buyers.
The survey of more than 1,000 people – carried out on March 23 and 24 – looked at the financial impact of the coronavirus pandemic.
It’s important you reach out to your credit provider as soon as possible, and keep up your current payments until any agreement is in place, as a missed or late payment could affect your credit scoreKelli Fielding, TransUnion
It also found that more than a third (35%) of 26 to 40-year-olds are preparing to tap into savings and 22% are borrowing money from a friend or family member.
More than seven in 10 (72%) in this age group said the coronavirus pandemic had already affected them in some way financially.
This was a higher proportion than older age groups, but lower than Generation Z adults aged 18 to 25, with 78% in this group saying their finances had been hit.
Kelli Fielding, managing director of consumer interactive for TransUnion in the UK, said: “Eight in 10 (78%) millennials say they are currently concerned about their ability to pay bills and loans.
“Among these, four in 10 (39%) expect this to impact them in the next two to four weeks – and over a third (35%) estimate the shortfall will be between £500 and £1,000.”
The Government and lenders have announced a wide range of financial support to people affected by coronavirus.
As part of financial “stop gap” measures to help people through the pandemic, the Financial Conduct Authority (FCA) proposed this week that overdraft customers should be charged 0% interest if they go into the red by up to £500, for three months. The FCA’s proposals are subject to a short consultation period and could be in place by Thursday April 9.
Ms Fielding added: “It’s important you reach out to your credit provider as soon as possible and keep up your current payments until any agreement is in place, as a missed or late payment could affect your credit score.
“It’s important millennials are familiar with their credit report and score as it will help them protect their financial standing during the pandemic and to understand what finance they are eligible for, if needed.”
Here are some tips from TransUnion for maintaining financial stability:
1. In the short-term, keep up to date with guidance on what financial support is available. You will also find help is available from many lenders so check in with your bank or credit provider.
2. In the long term, if you are considering credit, be sure to explore the various options available and think about the interest over the full term. Be careful not to overstretch yourself.
3. Consider the implications of the different kinds of credit. For example, a secured loan (one that is protected against a significant asset such as a house or car) may have a lower interest rate but it is a big risk that needs to be carefully considered.