- Student loan holders save nearly £2,000 less per year for deposits
- 44 per cent say repayments affect long-term financial stability
- More first-time buyers now target homes below £300,000
Student loan debt is increasingly shaping the way young people in the UK approach home ownership. A new Barclays report suggests those with student loans are saving significantly less for a house deposit compared to those without debt, slowing their path into the property market.
On average, borrowers are putting aside about £310 a month, while those without loans save roughly £473.70. Over a year, that leaves a gap of nearly £2,000, making it harder for graduates to keep up in an already expensive housing market.
The findings come as the UK student loan system faces renewed scrutiny. Chancellor Rachel Reeves has decided to freeze the repayment threshold for three years from 2027, a move that has drawn criticism and triggered a Treasury select committee inquiry.
A system under pressure
The pressure is not just about monthly repayments. Around 44 per cent of student loan holders say their debt limits their ability to build long-term financial stability, while 41 per cent feel it is holding them back from entering the housing market altogether.
Speaking as part of the inquiry, Labour MP Meg Hillier reportedly pointed to the scale of the problem in parts of London, where property prices remain far out of reach. She said young people in her area would struggle to even consider buying homes priced at £650,000 or more, as quoted in a news report.
There are also wider knock-on effects being discussed. Hillier suggested high housing costs could be linked to falling birth rates in London, which are already affecting school enrolment numbers.
At the same time, the financial advantage of having a degree appears to be narrowing. Graduates still earn more on average, around £42,000 a year compared to £30,500 for non-graduates, but rising student debt, now averaging £53,000, is eating into those gains.
Buyers rethink as costs rise
Faced with these challenges, first-time buyers seem to be adjusting their expectations. Barclays data shows a growing number are now targeting homes priced below £300,000, likely to avoid higher stamp duty costs.
In February 2026, around 68.5 per cent of first-time purchases fell under this threshold, up from 60.9 per cent a year earlier.
Jatin Patel, head of mortgages, savings and insurance at Barclays, reportedly said rising costs across the board are reshaping how people think about buying a home. He added that student loan repayments are slowing down deposit building, while energy price uncertainty is forcing buyers to consider long-term affordability more carefully.
