Student loan burden 'deterring first-time buyers'

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The Independent Online

The burden of paying off student loans is excluding would-be first-time buyers from the housing market, according to the mortgage bank Northern Rock.

Adam Applegarth, the bank's chief executive, believes many first-time buyers will continue to find it difficult to get a foot on the property ladder because of their higher-education debts, rising house prices and competition for suitable properties from wealthier buy-to-let investors.

The effect of five interest rate rises from the Bank of England since November 2003 had also caused the residential lending market to slow in the second half of last year. Tighter monetary policy will mean the home moving market being kept at relatively subdued levels for the next two years, said Mr Applegarth, who was delivering Northern Rock's annual results for 2004 yesterday, which kicked off the banking sector's reporting season.

Although the housing market is cooling, Northern Rock's results showed growth across the board, delivering pre-tax profits up 13 per cent on a like-for-like basis at £431.2m on net lending up 51.9 per cent to £12.9bn. Its share of UK net mortgage lending rose from 7.8 per cent to 11.2 per cent and loan enquiries yet to completed in the first month of 2005 were worth £5.1bn, a 31.8 per cent increase on the start of 2004. Earnings per share figures would fall 10 to 12 per cent because of the move to IFRS accounting rules.

Elsewhere, Crest Nicholson, the house builder, reported a 10 per cent rise in full-year profits, claiming the fundamentals for the UK market remained good.