Take the latest stats from the CML for June which shows the average LTV of a first-time buyer loan effectively being 80%. The average loan size has also gone up considerably in the last year from £123,750 to £127,451 – we are therefore talking about a requirement to have sizeable deposit savings in order to secure that first home.
The recent house price index from Nationwide said that the average property value across the UK was £195,279 – a 20% deposit to purchase that ‘average home’ would be just over £39k. With younger potential first-timers carrying student debts, high rental prices to pay and all other manner of financial commitments, it is incredibly difficult to save this amount of money; indeed, we are acutely aware that without family and/or friend intervention there is often little hope of reaching that type of figure.
For a period of time, we have seen a far better product market for higher LTV products however, it has to be said, that after the initial surge in supply which came from the catalyst of the Help to Buy 2 scheme, this has also started to trail off. It must also be said that a 10% deposit for that average home would still require £19.5k deposit. Again, for many that might wish to get on the ladder without the support of the Bank of Mum and Dad or that kindly aunt, it would be impossible to save that amount within a short space of time.
However, a 10%, or dare I say it 5%, deposit is far more achievable than 20% so it’s absolutely important that our lending community continue to engage with the first-time buyer market at high LTV levels. HTB2 undoubtedly increased product choice in this area but what comes next?
And this is an especially interesting conundrum for the Government, who set up the scheme, and those lenders who are currently taking part – what will they do when HTB2 comes to an end? After all we are just 16 months away from that point and there should surely be preparations being made now for what comes next? The great fear of course is that the answer to that particular question is, ‘Not much’.
Of course we have many lenders, particularly in the building society sector, who are totally committed to high LTV lending, are doing more than their fair share and will continue to do so. However, there’s no doubting that the ‘big boys’ currently part of HTB2 can do a considerable amount of good for the first-time buyer market if they will continue to offer these products, perhaps through private mortgage insurance, from the start of 2017. Again, the worry is that we return to pre-HTB levels of high LTV lending which would make it even harder for first-timers to make those purchases.
So, one would hope now that the HTB2 lenders as we progress through the year and into 2016 are able to make their post-Scheme plans known. I suspect a continued commitment to high LTV lending would be warmly welcomed and provide a boost of confidence to a sector of the market which might otherwise be thinking that there are more tough times to come.
