"First-time buyers need more support than ever from the beginning to the end of the homebuying process. "
Although first-time buyer numbers appear to be on the increase, millions of Brits are still waiting for the chance to own their own home for the first time. This was the sentiment of a recent IMLA report which highlighted a 2.4 million shortfall of Brits who had expected to get onto the property ladder since the financial crisis but hadn’t managed to do so. On a more positive note, lenders are continuing to aim for more 70-90% LTV lending as arrears remain at historic lows and low mortgage rates support affordability. And there is even movement at 95% LTV.
This is a trend evident in research from Defaqto which suggested that high LTV mortgage rates have fallen to an all-time low while product availability continues to expand. Figures showed that - at the time of the research – the average interest rate on a two-year fixed rate mortgage at 95% LTV has reduced from 3.98% a year ago to a current level of 3.46%.
Additionally, there were now said to be 290 95% LTV fixed rate products available on the market – 46% more than a year ago. More lenders are also serving this market with 58 providers today compared to 52 last year.
We can’t ignore the growing influence of building societies in this area who, according to BSA figures, upped their overall mortgage lending by 7% to £68.9bn in 2018. A total of 476,803 new mortgages were approved, up 8% on 2017, amounting to 31% of all mortgages approved last year. Importantly, around one in three building society mortgages were to first-time buyers and it continues to be the smaller, more flexible lenders who are more active towards the higher LTV levels.
A raft of government initiatives such as the shared ownership scheme and Help to Buy initiative have certainly helped but it’s evident that first-time buyers need more support than ever from the beginning to the end of the homebuying process. Aldermore’s First Time Buyer Index recently found that prospective first-time buyers are struggling with common housing and mortgage jargon, with over half (52%) not understanding the Help to Buy equity loan very well, closely followed by the Lifetime ISA, where over two fifths (47%) showed a lack of understanding. This means many first-time buyers could be missing out on much needed assistance to get on the housing ladder. By not being conscious of the shared ownership option or the Help to Buy equity loan scheme, many would-be buyers - even those with smaller deposits - may not be fully aware of all the homeownership paths open to them.
This highlights the importance of working as an industry to better educate potential buyers and intermediaries in terms of how this can be aligned within the advice process. By collectively sharing knowledge we can help more would-be borrowers to find the solutions which best match their homeownership aspirations and fuel the first-time buyer sector with the forward momentum it needs.
