Integrated - Borrowed Money and Borrowed Time?
Has anyone any idea of the approximate proportion of integrated students currently completing their training using borrowed money? The BoE rate is currently 3% and the most generous mortgages seem to be 5.25%-5.75%, it's forecast that the BoE rate will go to around 4%-5%. I reckon it'd be sensible to assume that the interest on a flight training loan is around 7% in such a scenario, taking into account the lending bank's marging above the BoE rate. I know the media are saying that mortgages may come down due to the effect of futures contracts on bank lending rates etc. but I don't necessarily see this happening. Credit Suisse were recently saying that the BoE is underestimating inflation and implying that the BoE needs to be more hawkish when rate-setting.
Say a student borrows £110k (course plus living expenses) with a two year repayment holiday to allow for course completion and job hunting, at 7% interest that comes out at £125939 to repay at the end of the two years.
Historically, I believe flight training loans were repaid over a period of around 7 years from the end of the repayment holiday, assuming this is the case, that would leave monthly repyaments of £1901 and a total amount to repay of £159664. If we assume that a single person would need £1500/month to live, giving the current inflation etc. post-training, that would require a first job with a salary of just over £55k/year, or closer to £60k/year if they want to pay into a pension.
To keep repayments below £1000/month, the repayment period would theoretically need to be around 20 years, with a total repayment amount of £234337. In reality, a cadet would likely have accrued enough salary to be able to make overpayments and reduce the repayable amount and repayment term by a fair bit and of course there's factors like inflation which could reduce the debt in real terms etc.
In my view, these sort of numbers pretty much end any case for integrated training unless one can afford the entire cost of the course without getting into debt. To what extent is the whole integrated/MPL side of training dependent on cheap money? Could the economic situation make it pretty much unviable for flying schools to offer whitetail integrated programmes and for airlines to expect their cadets to fully fund the training bill?