Understanding today’s first-time buyers

Jon Cooper Head of mortgage distribution, Aldermore
27th January 2022
ftb first time buyer young millennial

The learning objectives for this article are to:

  • To be able to describe the current challenges facing first-time buyers
  • To be able to identify the different schemes and products available to first-time buyers and when they would apply
  • To be able to describe how specialist lenders may be able to help first-time buyers 

First-time buyers face enormous challenges to get on the ladder.

The deposit barrier is probably the biggest, followed by stretched affordability, depending on whereabouts in the country they’re buying.

Average first-time buyer property prices are now £233,267, up by a significant 9.2% in the last year, according to the latest figures from HM Land Registry.

As aspiring homeowners continue to save their deposit, it can feel like rising property prices move their goal ever further away.

The good news

Thankfully, we’ve seen lenders – including Aldermore – return to the high LTV market in 2021 and there’s a much greater choice of 90% and 95% deals than in 2020.

The Bank of Mum and Dad is also giving some buyers a hefty leg up onto the ladder, alongside a raft of homeownership schemes, some government-backed, some privately run.

According to UK Finance, buyer assistance (from parents or homeownership schemes) is involved in around 40% of all first-time buyer purchases.

Add to this the role of lenders, with high LTV mortgages, first-time buyer products, professional mortgages and guarantor-style mortgages all helping first-time buyers to get on the market.

The significant support available means that, despite the hurdles, first-time buyer business remains robust, accounting for about half of all purchase loans, according to UK Finance.

Of course, first-time buyers are not a homogenous bunch – they never were. We need to really understand them, and that’s why Aldermore undertakes regular research to find out exactly what they need and want.

First-time buyer research

The best way to understand first-time buyers is to listen to them, so we do regular quantitative and qualitative research with aspiring and actual first-time buyers to gauge their thoughts.

We’ve done this multiple times in 2021 to get a really good insight into what first-time buyers want and how we can help them.

Earlier this year they told us getting onto the housing ladder is still a struggle. For example, 72% of aspiring first-time buyers said they thought buying a home was unachievable for them.

We conducted further research with IPCRESS, which highlighted changing preferences in the types of homes first-time buyers are interested in following the shift to working from home.

This is what we found:

·       First-time buyers are changing their priorities in terms of their preferred location. They aren’t so tied to their office location, especially if it’s in London.

·       Many believe they can move further out of city centres and further into suburbs as they need to be in the office fewer days a week.

·       All of our first-time buyer respondents said they need a place with workspace separate to their living space.

·       They’re looking for properties with outdoor space, something we’ve seen across the whole market.

In Autumn 2021, we commissioned research from Opinium with first-time buyers who have purchased during the pandemic. It revealed:

·       Nearly three in five (58%) first-time buyers in the UK that bought since March 2020 had to raise a larger deposit than intended due the ongoing impact of Covid-19

·       Just under half (45%) needed to borrow money from their family/friends to raise extra money for the deposit due to Covid-19.

·       Half (49%) experienced a house purchase fall through, costing on average £2,403

·       Their experience with their broker or adviser was overwhelmingly positive - 87% said they had a good experience.

Growing specialist requirements

We know many first-time buyers are struggling to find a mainstream mortgage.

This is down to a range of factors, including having a low deposit, being self-employed, experiencing a credit blip, or purchasing with Help to Buy.

What was already a diverse and increasingly complex market has become further complicated by the financial impact of covid, which has fallen hardest on younger people, according to the Office for National Statistics.

As a result, first-time buyer business is becoming more specialist and the requirement for non-standard mortgages continues to grow.

Specialist lenders have a key role to play in helping support these groups.

Broker benefits

Many of your first-time buyer clients won’t consider themselves to have non-standard circumstances, but they will benefit from specialist advice from a broker.

Now more they ever they are likely to need your help to navigate the increasingly complex first-time buyer mortgage market and find a solution tailored to their needs, whether standard or more specialist.

Our research highlighted that first-time buyers who sought broker advice found the experience extremely valuable.

But many others were not aware of what brokers can offer or didn’t know how to find a good one. There’s a clear need for broker advice, but many first-time buyers just aren’t aware of it.

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To recap, this article has helped you...

  • To be able to describe the current challenges facing first-time buyers
  • To be able to identify the different schemes and products available to first-time buyers and when they would apply
  • To be able to describe how specialist lenders may be able to help first-time buyers