How can advisers set themselves apart in the first-time buyer space?

For some time, the prevailing orthodoxy around financial services has been that ‘consumers are increasingly financially savvy’ and I wouldn’t disagree with that.

Related topics:  Blogs,  Mortgages
Patrick Bamford | Qualis Credit Risk
7th February 2022
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"In 2022, first-timers are still the only borrower demographic to benefit from a stamp duty holiday, and there are more mortgage options for them than certainly a year ago."

However, when it comes to buying a first home, even the most ‘savvy’ of first-time buyers might struggle to understand exactly what they have to do, what is on offer, what might be the best option for them, and everything else that goes with taking that first step on the ladder.

Of course, that’s where advisers play a major role, and we as an industry should continue to push that message and encourage would-be property purchasers to visit/speak to/email advisers as a matter of course before they do anything else.

This becomes even more self-evident in a housing environment where, according to the latest Nationwide house price index, house prices have risen by over 11% in the last 12 months.

Potential first-timers looking at this might well think that the longer they leave it, the more money they will have to find to purchase, and that’s without any sort of discussion around rising interest rates, tighter affordability criteria, and the continued delivery of high LTV mortgage products.

Indeed, of course, all of these are related and will have an impact, but let’s take an up-to-date example of where advisers can set themselves apart and how they can help drive first-time buyer business.

Now we have known for some time that high LTV mortgage activity has improved ever since the Government launched its guarantee last year which acted as a catalyst.

Currently, and based on the Nationwide’s average house price of £255,556 which would require a 5% deposit of just shy of £13k, there are over 220 95% LTV products of all terms and all types. Many, it has to be said, not part of the Government scheme at all but using private insurance arrangements.

However, if you can put a 10% deposit down that increases to over 520 products and if you can put 25% down that increases to close to 1,600 products.

What however is really noticeable is the type of products that are leading the ‘best buy’ tables at present. As we tend to know, most first-time buyers tend to look for rate certainty with their first mortgages, opting for the fixes that provide them with that.

Over the course of 2021 those ‘best buy’ rates tended to be fixed-rates anyway, but it is now noticeable just how many discount and tracker rates are ‘leading’ the way. On the face of it, if you’re a first-time buyer carrying out mortgage product searches, you might well think that these are the ‘best buy’ rates and ones you should be securing.

However, as I write this, the MPC is expected to increase Bank Base Rate again and potentially a number of other times through the year, which will be followed by those same discount and tracker rates increasing again, which will add further cost to any first-time buyer who has opted for these products.

Now, of course, this might be very well known by the prospective borrower, but then again it might not. In a world where, for example, people search online for financial products such as insurances and invariably opt for the ‘cheapest’ rather than the most suitable, this is clearly not the right strategy for a first-time buyer who thinks they can do it themselves.

Indeed, as we know, the individual might not be suitable or eligible for any of those best buy products anyway, but they’ll only find out by applying online/direct, being rejected and wondering why that was the case.

There is a real opportunity for advisers here. Last year, according to the Halifax, 400,000 people bought for the first time – in 2022, first-timers are still the only borrower demographic to benefit from a stamp duty holiday, and there are more mortgage options for them than certainly a year ago.

With house prices continuing to rise, so might their motivation levels to buy this year rather than wait any longer. It is so important they use the services of an adviser to do this, because it can be a veritable minefield to wade through. The industry should not be shy in putting this message out there with the ‘good news’ that there are ways and means to buy, but you need to have someone who understands the market fully on your side in order to do so.

The first-time buyer market is unlikely to get any simpler to navigate. Advice should be a non-negotiable. Let’s make that clear to one and all.

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