"We also need to engender a much more positive market for ‘second hand’ properties, rather than putting all our eggs in the new-build basket."
Take for instance, the figures from Hamptons International just this month which reviewed how long (on average) it would take a wannabe first-time buyer to save up for a deposit. If they started saving today, they would be moving into their first home in July 2029 and if they wanted to live in London they’d be able to do that in July 2034.
And if that doesn’t make the next generation of homeowners blanche, then they should also be aware that this is ‘good news’ because, back in 2016, it would have actually taken them longer to save – up to 10 years and nine months for those wanting to purchase outside the Capital.
It’s a sobering thought not just for those who might want to get on the property ladder a lot quicker than in the next decade, but also I suspect for those advisers who might wish to be doing a lot more first-time buyer purchase business over the same period.
When faced with such an uphill struggle to save for a deposit, it’s perhaps no wonder that we are seeing far more focus on the Bank of Mum & Dad, and a lending community increasingly tailoring their mortgage products towards those borrowers lucky enough to be able to access it.
These sorts of statistics appear to back up our most recent iteration of the LTV Tracker which would probably put a bemused smile on the face of those potential first-timers who are so crucial to our marketplace.
On the one hand, the cost of mortgage borrowing – for both 75% LTV and 95% LTV clients – is actually going down quite significantly, purely based alone on the pricing of products. Indeed, as you’ve no doubt seen in recent months, the competition in this part of the market has heated up, and – it’s positive to report – that we are seeing more product options in the high LTV space.
However, when we look at the overall cost for these types of borrowers we see that it has in fact increased fairly substantially from the last quarter, and that’s because the price average first-time buyers are now paying for their first homes has gone up by almost £10k since the last Tracker.
So, while we’ve seen the rate differential between higher and lower LTV borrowers narrow – again good news – the fact that homes first-time buyers tend to be buying are now more expensive, means that they are paying more each month for, what is likely to be, their biggest financial commitment.
Now, this type of analysis also doesn’t seem to chime with the house price indices that are produced each month, because most of these are showing a drop in annual house price inflation. Indeed, the most recent one from the Office for National Statistics suggests that HPI is at a six-year low.
However, could the answer lie in another set of statistics, this time from Reallymoving which looked at Help to Buy sales and found that, on average, users of the scheme were paying £303k per property, compared to £270k for those who paid ‘independently’. And, given that Help to Buy, is a scheme that is aimed at first-time buyers then it seems entirely plausible that first-timers are willing to pay more for new-builds within HTB than they perhaps would be either outside the scheme or indeed if they were not buying a new-build property at all.
There’s no doubting that the picture for first-time buyers overall does not look as pretty as it has perhaps been painted in recent months. And when you add in the Brexit factor, it looks even more uncertain.
What we can say, on the positive side, is that lenders appear much more willing to go to higher LTVs on their mortgage products, and that this will undoubtedly benefit some borrowers in terms of getting them to a sustainable deposit level sooner.
But there is clearly room for improvement, and we also need to engender a much more positive market for ‘second hand’ properties, rather than putting all our eggs in the new-build basket. As we all know, given the still muted level of supply, this is never going to meet the demand, however part of me thinks the damage might already be done. For many first-timers it’s now new-build or nothing.
