Current lending regulations do not match the will of first-time buyers – Murphy

Current lending regulations do not match the will of first-time buyers – Murphy



It would probably be fair to say that around October and November last year, we couldn’t have predicted that December, or the start of 2025, would be filled with plenty of business activity and lots of positivity.

Far from it – particularly with the Budget having put such a dampener on things.

While there was a degree of positivity back then around the potential for fairly substantial bank base rate (BBR) cuts through 2025, which could, should or will act as a catalyst for greater levels of activity, there was also a sense of uncertainty about what might unfold. 

Certainly, January has appeared to show that in spades, with the cost of government gilts and therefore swap rates moving up quite sharply, before a drop in inflation and an uptick in GDP moved them in the opposite direction, with the markets now appearing to bake in a BBR cut at the next Monetary Policy Committee (MPC) meeting in February, and, we are led to believe, perhaps three further cuts in 2025.

With that all being said, our own experience – certainly of December and the year to date – has been incredibly positive, leading me to suspect that, for many people, the new year has driven a further decision to act, regardless of what rates may or may not be doing. 

That is certainly the feeling we have had when it comes to purchase business, where many clients have already decided to bite the bullet, after a period of sitting on their hands, wondering when the wind might change in their direction. 


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Determined first-time buyers 

Interestingly, first-time buyers have been very prominent in the early weeks of January – particularly in London, it has to be said – with a number willing to go over the asking price of their chosen property to have their offer accepted. 

I’m not suggesting this is an overwhelming theme for the next 12 months, but as we already know, first-time buyers have been the dominant purchasing force for the last couple of years already. Even in these early days, that looks like it could continue, and they are not frightened of putting their money where their mouth is. 

There is much that may be driving this, of course – not least the easing of affordability, house prices not having rocketed in recent years, and rates being lower than they had been – but perhaps that urge to act has become so overwhelming for some that doing nothing, or waiting longer, just isn’t going to cut it. 

One wonders, as well, what impact is the greater availability of high loan-to-value (LTV) mortgages having on first-time buyers?

We are not, of course, drowning in such products, but they have grown in number, even within a regulatory environment that – up until now at least – has put the handcuffs on lenders who want to write more of this business.

 

Loosening up to fuel growth 

I say up until now because recent reports do suggest the government is less than keen on these measures being kept in place.

It has urged all regulators to look at shedding some of these shackles to growth, and clearly, the Financial Conduct Authority (FCA) is being put under pressure to review the stops it has placed on lenders and their first-time buyer/higher LTV business activity.

Of course, a new government with a large majority that desperately needs growth might well be in the best position to tell regulators exactly what it wants them to do. Although, just what that might mean for any semblance of impartiality or independence is perhaps a topic for another day. 

The positive here is that, up until now, there has undoubtedly been a reluctance to row back on those rules and regulations that were brought in after the credit crunch – and were of course much needed then. However, there has to come a time when you reassess their ongoing relevance, particularly within a very different market environment, and quite clearly, they are stopping a certain number of consumers from either getting on the ladder or indeed moving up it. 

No one is suggesting a wholesale return to, say, 100%-plus LTV mortgages, self-certification to the nth degree, or acceptance based on whether the borrower had a pulse or not, but we can surely ease some stress-testing and/or the 15% cap on lending at more than four-and-a-half times income? 

 

Matching the tenacity of aspiring homeowners 

If we do have a very resilient bunch of would-be purchasers who have already begun making their move, then we are certainly likely to have a further bunch who want to do the same but are being stymied by these regulations.

I’ve certainly been impressed (and a little surprised) by the sheer force of first-time buyers feeling that now is the right time to act, even if the market is not exactly working fully in their favour.

A review and some notable tweaks to current rules and regulations will do much for their ability to secure the mortgages they need. But it can’t be a long-drawn-out process as so many regulatory consultations and reviews are; it needs to be expedited and introduced ASAP in order to quickly improve the supply of ‘new blood’ in the mortgage and property market that we are all so keen to see.





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