After taking on large amounts of debt when interest rates were low, older millennials are most at risk for financial problems.
According to Savills estate agents, buyers in their 30s took out the largest mortgages during the 2021-22 financial years and will face the greatest pressure when they remortgage.
According to the Centre for Economics and Business Research, these buyers may be forced to sell if their new payments are too expensive. This would cause a rapid fall in house prices.
Savills’ analysis revealed that buyers aged 35-39 bought properties with mortgages in excess of PS195,407, an average of more than any other age group.
The average deposit was 47pc of purchase price at PS174 448
The second largest debt was taken out by buyers aged between 30 and 34. Their deposits averaged PS136,254, which is 42 percent of the price paid.
Compared to this, buyers older than 55 years, who are often downsizers and downsizers, took out an average mortgage of PS68.109. To finance the majority of their purchases, they used large deposits of PS287 531.
Buyers in their 20s and 30s had lower loans and deposits than buyers in their 30s at PS186,223 compared to those in their 30s at PS74,006 and PS74,006 respective.
Lucian Cook of Savills said that those in their 20s are more likely to buy smaller flats or the best properties for their money.
In their 30s, buyers are choosing larger properties to start families. This is why they are taking out more debt.
Mr. Cook stated that they are the most vulnerable to an increase in interest rates.
He stated that buyers in their 30s are the “bedrock” of the housing market, accounting for almost a third of all housing sales in the 2021-22 financial years.
In their 30s, buyers bought 172,987 houses – more than any age group – while buyers in their 30s bought only 147,004 houses.
Mr Cook stated that many first-time buyers were in their 30s and helped by Government support programs like Help to Buy.
The Help to Buy program was closed to new applicants in October. First-time buyers purchased new homes with a deposit as low as 5pc. The Government provided a loan up to 20pc (40pc in London) and interest-free financing for five years.
Cook stated that older millennials are now more dependent on their elders to trade up or get on the housing ladder.
He stated that young families may be facing additional cost pressures like rising childcare bills which makes it harder to manage higher housing costs.
Because they are downsizing, older buyers tend to spend less money on properties than their counterparts in their 30s. Another factor that lowers their mortgage amounts is the fact that they are spending less. Many older cash-rich buyers buy properties instead of paying mortgages to avoid the hassle.
Cook stated that older buyers represented a lower percentage of transactions due to barriers such as stamp duty tax, a shortage of suitable homes and emotional attachments to family homes.
Kay Neufeld of the Centre for Economics and Business Research said that rising mortgage rates were caused by large mortgage debts. Because they had smaller loans, older generations could live with mortgage rates exceeding 10 percent.
Neufeld stated that although the mortgage rates are not unusual, people have taken on so many debts because of the rise in house prices. This is why we are seeing such an impact on disposable incomes.
He stated that there was a possibility that older millennials might be forced to sell up if they find their new mortgage rates too expensive. This would “definitely cause an acceleration in house price drops”.
According to Oxford Economics, a research company, house prices are expected to drop 12 percent this year.