"The new decade is set to be an exciting time as we see many demographic changes and consider how we can provide innovative but sustainable solutions"
The past decade has seen huge changes in the mortgage market and property ownership put under the microscope like never before.
As we start a new decade, many of the innovations and developments we have seen will continue to feature and new ones will appear to further transform the needs of first-time buyers.
A crucial market segment
First-time buyers are still, and will continue to be, a key market for brokers and lenders in 2020. However, this is a changing customer type and we must continue to adapt to rapidly changing market forces when it comes to income sources and employment status. Not only this, but first-time buyers are a growing segment so it’s vital that we take into account their affordability requirements, employment status and the type of property they are likely to buy when forming new product and criteria to ensure access the right type of mortgage for the future.
Funding their first home
New buyers are becoming more inventive when looking to purchase and sourcing the right product and making sure they can afford the ongoing payments. In fact there are more options than you think, and no doubt 2020 will see even more! They can look at extending the mortgage term to keep monthly payments low, some will work two jobs to save for a deposit and keep up repayments, also the use of family funds from inheritance money and gifted deposits are becoming popular choices for many.
If it’s a joint application, there’s also the partner’s income and employment record to take into account. There’s a more diverse spectrum of job roles and employment contracts than ever before!
The end of Help to Buy
The new decade will also see the end of the current Help to Buy scheme in 2023. There’s no indication yet if another first-time buyer incentive will be introduced by the government but it probably will be once the current scheme has been reviewed and the specific needs of new buyers are taken into account. Lenders, however, will continue to innovate to accommodate them in order to keep the flow of lending ongoing for first-timers. It’s probably too important a section of the market for them not to.
Longer terms are here to stay
The past decade has seen a lengthening of mortgage terms across all borrower types. Currently, more than 40% of first-time buyers opt for a mortgage with a term of 30 years or greater. This means more can be borrowed to get their dream home or lower monthly repayments can be achievable. This also has another consequence for lenders, in that as first-time buyers are getting older and take out mortgages for longer, more and more will not finish paying off the mortgage until they are into retirement age. However, this is something that many lenders have already acknowledged and developed criteria for.
A vision for the future
It’s clear that the first time buyer market is going to become more complex and fragmented in the years ahead. Lenders and brokers will need to work together to accommodate and innovate as we go forward as each case will need to continue to be looked at individually as employment and affordability become more complex. The new decade is set to be an exciting time as we see many demographic changes and consider how we can provide innovative but sustainable solutions for those looking to make their first step on the housing ladder.