FIGURES released from the National Association of Estate Agents (NAEA) reveal only three per cent of homes sold in June were to buyers aged 18 to 30, with research from Experian, the global information services company, suggesting it could be due to young homebuyers severely overestimating the affordability of mortgages.

The NAEA figures mark a steep fall from last August, when the age group made up 12% of homebuyers. That follows April’s Mortgage Market Review (MMR), which specified that all mortgage borrowers will need to show they have considered how they will be able to manage their repayments in the long term - for example, in the event of an interest rate rise.

Despite the MMR’s emphasis on affordability, Experian found that a third of all would-be 18 to 29-year-old buyers surveyed admit they currently find it difficult to budget each month.

  • Half (52%) confessed to overspending in the last month
  • A quarter had to dip into their overdraft last month - 12% heavily
  • One in six (18%) say they are unable to cut back outgoings any further

Research also suggests that many young homebuyers might be guilty of complacency when it comes to getting their credit score and financial situation in order. One in 10 (nine per cent) do not plan to prepare their finances before their mortgage application, while another fifth (19%) only plan on preparing a month before their application.

Moreover, fewer than one in 10 eight per cent) have checked their credit score in the past six months, which would help provide a clear picture of their financial situation and how they are likely to be viewed by lenders, including how competitive a mortgage offer might be.

Furthermore, only a third (34%) plan to clear outstanding debt before applying for a mortgage and under a fifth (18%) to even pay down their borrowing, actions that will improve borrowers’ credit scores and free up additional funds each month.

Peter Turner, managing director, Experian Consumer Services, UK and Ireland, said: “These findings show just how important it is for young people to get their finances in the best shape possible in advance of a mortgage application.

"Interest rates have been low and stable for so long that the current generation of first-time buyers has never known it any other way but, as the economy improves, interest rates will inevitably rise and could rise several times.

"It’s therefore vital that young people seize control of their financial situation to get themselves in the best possible shape. Improving your credit score is critical for younger borrowers, many who may not have built up a sufficient credit history or may be unaware how their past repayment affects future borrowing.”