The challenges being faced by first-time buyers, and the vital role of lenders and brokers in helping to instil confidence in that market, continues to be a hot topic.
While the new government could, in time, help to improve conditions for those looking to get on the property ladder, any changes on the political front are likely to be some way off.
It therefore falls to lenders to help keep this vital part of the market moving by adopting an innovative and common-sense approach to products and criteria.
This can only be done by seeking to understand the factors that threaten to jeopardise home owning dreams.
We’ve done a lot of work in this area, including launching new products, extending criteria and considering the needs of individual applicants as part of our manual underwriting process.
Figures included in the latest Household Finance Review from UK Finance suggest that some of the pressures for first-time buyers may be starting to ease slightly. It said first-time buyer numbers for the second quarter of 2024 were up 19% compared with the same quarter in 2023.
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Despite this, affordability pressures are expected to continue to dominate throughout the rest of this year.
So while factors such as reducing rates, greater availability of higher-LTV products and innovation from lenders could be starting to have an impact, we can’t take our foot off the gas.
Gifted deposits
It’s clear that first-time buyers continue to rely heavily on support from their parents and family members.
A recent survey from Zoopla found that almost two-thirds (63%) of first-time buyers in the last five years did so with financial support from family. This rose to an incredible 76% for the under-30s.
Parents are the main supporters, giving an average of £58,129, but other family members are also stepping in. One in five had help from grandparents, 14% from siblings and 10% from aunts and uncles.
It’s factors like this that we need to recognise as lenders. For that reason, we also accept gifted deposits from siblings, grandparents, aunts and uncles, in addition to parents.
Raising deposits through other means
However, not everyone is fortunate enough to have a relative with thousands of pounds in cash available to gift, and we need to ensure these buyers are not excluded from homeownership.
Our Deposit Lite mortgage, therefore, enables parents to use equity in their homes to help their children get on the ladder with smaller deposits.
It’s not just raising a deposit that is proving challenging for first-time buyers, though, it’s the affordability of the mortgage itself. According to Rightmove, the average first-time buyer monthly mortgage repayment has risen from £667 to £1,075 since the 2019 general election, with higher mortgage rates putting additional strain on affordability.
One way this is being mitigated is through longer mortgage terms. The UK Finance Household Finance Review found the proportion of buyers borrowing over longer terms is far higher than in the past, with more than one in five first-time buyers taking out terms of 36-40 years.
Another solution to the affordability issue is the joint borrower sole proprietor (JBSP) proposition.
Our JBSP options have now been integrated across the majority of our prime range to extend availability. JBSP enables two parents to join the borrower on a mortgage to improve affordability, but without the need for them to be co-owners of the property.
The role of the broker
While it’s down to lenders to be as flexible and innovative as possible, the other part of the equation is the knowledge of the broker. Lenders can have different product options, differing appetites for risk and very individual criteria.
But there are options, and knowing what’s available can make a huge difference to buyers looking to take their first step on the property ladder.
