Student debt eats away home deposit savings to tune of £2,000 a year, says Barclays | Student finance
People with student loans and working towards a house deposit save almost £2,000 less a year than those without debt, according to a new report from Barclays.
The bank also found that 44 percent of student loan holders claim repayments limit their ability to achieve long-term financial stability, while 41 percent say it prevents them from entering the housing market.
The data coincides with a re-examination of the student loan system after chancellor Rachel Reeves opted to freeze the threshold at which loan repayments begin for three years from 2027.
The announcement in Reeves’ November budget sparked widespread criticism, including from Labor MPs, and prompted the launch of a Treasury select committee inquiry, a ministerial review of options to ease the burden on graduates and a campaign from consumer champion Martin Lewis.
Announcing the select committee’s investigation earlier this month, committee chair Labor MP Meg Hillier said: “House prices in my area are particularly high. You can’t be a young person in the area and look across the road and think, ‘I’m going to buy the property that’s being built’ because they’re £650,000 or £750,000 for a two-bedroom flat.”
He suggested that high housing costs may partly explain London’s falling birth rates, which have contributed to falling school student numbers and, in some cases, school closures.
Barclays research says: “For those actively accumulating home savings, there is a savings gap between those with student loans and those without.
“People with outstanding student debt report saving £310 a month towards a deposit, while those without a loan say they save £473.70 a month, or an extra £163.70.
“This puts debt-free individuals £1,964.40 closer to their savings target over the course of a year than individuals with student loans.”
Graduates generally enjoy an earnings premium relative to their non-college-educated peers. However, the gap has narrowed significantly in recent years.
Latest Official figures show the average annual salary for graduates is £42,000 and £30,500 for non-graduates. Average student loan debt in the UK has also risen to £53,000It reflects changes to the system and increases in tuition fees.
Barclays said many first-time homebuyers were trying to reduce the cost of buying a home elsewhere, including increasingly targeting homes below the stamp duty threshold. It said its findings were based on two surveys of 2,000 consumers conducted by Opinium Research.
Data in the report reveals that 68.5% of home purchases by first-time buyers in February 2026 were properties priced below £300,000, compared to 60.9% in February 2025.
Jatin Patel, head of mortgages, savings and insurance at Barclays, said: “Rising external costs are reshaping the UK’s approach to homeownership.
“Student loan repayments are slowing deposit savings for many eager buyers, while unstable energy prices are also forcing households to think more about the long-term running costs of their homes.”
