Certainly there is a comfortable flow of ideas and trends which move in both directions across the pond and it’s not necessarily the case that the UK is simply following the US fashion.
However, when it comes to the UK housing market one wonders if there is not scope to follow some of the US’s lead, particularly when it comes to developing access to finance for first-time buyers. I was more than reminded of this when looking at the latest statistics to come out of the US from the National Association of Realtors (NAR – not to be confused with the NRA which is something entirely different). Overall sales of existing homes for May were the highest they have been in the last six years but it was the specific first-time buyer statistics that really drew the eye.
In May there was an increase in first-time buyers’ share of the purchase market, up from 30% the month before to 32%. Now this doesn’t seem like a monumental increase but this was its highest share of the market since September 2012 and was a quite substantial 5% up on the same month in 2014. Compare this to the latest figures we have for March from the CML which showed that the total number of loans advanced to first-timers stood at 23,000 – down 5% compared to March 2014.
So, what could be the reason for this increase in first-time buyers in the USA, after all as the NAR point out – and much like the UK – supply of housing to the market is still tight, homes are selling fast and house price inflation is near double-digit figures in certain regions. It too stresses the need for far greater supply of new homes into the marketplace or it fears prices will remain high, even if mortgage rates go up. A similar view is expressed often for the UK.
First-time buyers though are staging a strong comeback in the market, says the NAR, for three main reasons. Firstly, there have been strong job gains made amongst young adults. Secondly, mortgage insurance is less expensive than previously allowing lenders to deliver greater supply of high-LTV mortgage products. And thirdly, lenders are offering more low-deposit programmes in order to support first-timers’ home-buying ambitions. These three core positives mean that the NAR has an expectation for even more first-time buyers being able to get on the ladder in future months.
But what of the UK? Our own recent Genworth/Moneyfacts research suggests that high-LTV lending – the mainstay of first-timers being able to purchase – has been falling back in recent months, in fact 95% LTV lending was down by £147m year-on-year in quarter one 2015. This has meant a 10% drop in the number of first-time buyers which means that 10,400 fewer people have managed to buy a home so far in 2015, compared to last year.
Admittedly, these statistics are pre-General Election and cover the rather damp start to the lending year, but it is a worrying move and one that perhaps needs addressing by looking west to the US. Help-to-Buy 2 has helped considerably, however it’s only a temporary solution. What the market would really benefit from is a permanent system of private mortgage insurance and capital relief for lenders. Whereas in the US this combination of factors is incentivising lenders to offer more low-deposit mortgages, in the UK for the most part it is sorely missed. We need a permanent focus on this area of the market and a commitment to help lenders help first-timers through mortgage insurance; if we do not then we are likely to be in the current situation (or probably a worse one) for some time to come.
