Fifth of millennials who were saving for first home now using cash to cope day-to-day

Some 22% of millennials who had been planning to get on the property ladder will be tapping into their savings instead, as their incomes have been affected by the coronavirus pandemic. (Getty)

More than one in five 26- to 40-year-olds who had been hoping to buy their first home are now using their savings towards coping financially day-to-day, according to a new survey looking at the financial impact of COVID-19.

Some 22% of millennials who had been planning to get on the property ladder will be tapping into their savings instead, as their incomes have been affected by the coronavirus pandemic, the survey of more than 1,000 people — carried out on March 23 and 24 — by credit checking company TransUnion found.

The housing market has been hit by the coronavirus pandemic in the UK as people put off plans to move. Lenders are giving buyers extensions on mortgage offers, to allow people who had been on the brink of moving before the coronavirus lockdown to do so at a later date.

First-time buyers have been especially affected as some lenders have also been temporarily restricting the range of mortgages they are offering to new borrowers, particularly those with lower deposits.

Read more: One in four businesses plan layoffs and half plan to furlough

The research also found that more than a third (35%) of 26- to 40-year-olds are preparing to dip into savings and 22% are borrowing money from a friend or family member to get by.

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.”

Millennials have been financially hit by the coronavirus pandemic more than older age groups as more than seven in 10 (72%) said they had already felt some kind of economic impact.

However, Generation Z reported feeling the greatest financial impact with 78% of 18- to 25-year-olds feeling the pinch, although many of those are still supported by their family, live at home, and have less to lose financially.

The government and lenders have announced a wide range of financial support to people affected by coronavirus.

The Financial Conduct Authority (FCA) proposed a range of “stop gap” measures to banks and other lenders including giving customers a three-month payment freeze and charging overdraft customers 0% interest if they go into the red by up to £500.

Read more: Banks told to 'repay the favour' from 2008 with COVID-19 support

The FCA also recommended that firms be required to make sure that all overdraft customers are no worse off on price when compared to the prices they were charged before the recent overdraft changes, hiking fees to up to 40%, came into force.

The FCA also want lenders to ensure consumers using any of these temporary measures should not have their credit rating affected 

The FCA’s proposals are subject to a short consultation period and could be in place by 9 April.

The British Chamber of Commerce (BCC) and the Chartered Institute of Personnel and Development (CIPD) both issued warnings on Thursday, saying millions of people could be fired or furloughed as COVID-19 brings the economy to a halt.

CIPD said 52% of businesses surveyed planned to use the furlough scheme. The BCC’s survey of 600 businesses found 44% were planning to furlough at least 50% of staff in the next week.

Nearly a million people applied for universal credit benefit in the past two weeks, suggesting redundancies have already begun en masse.