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The future for first time buyers with layered complexity
As the market slowly changes for first time buyers, there could be a light at the end of the tunnel.
One of the main talking points post- ‘Mini Budget’ has been around how the changes to the mortgage market might impact first-time buyers, particularly those who had perhaps previously thought they were in a strong position to act sooner rather than later.
The recent moves push a positive direction for pricing, products and criteria are starting to restore the balance a little in the market, but we still face a significant number of challenges in supporting greater numbers of first-time buyers into the housing market.
Recent research from Aviva outlines this in spades suggesting that issues, in particular the increased cost of living but also the recent increase in mortgage costs and the ongoing difficulty in securing the necessary deposit level, are forcing a significant number of under-45s to cancel any plans they might have had to purchase. It suggests that over a million people in this age demographic might have felt the need to do just that in recent weeks.
The average age of a first-time buyer continues to rise, the Covid pandemic appeared to expedite this, pushing the average age up to 34. According to Land Registry, individuals are taking longer to meet the requirements of getting on the ladder. We might expect that figure to continue to increase.
In other areas of our market, in terms of access to specific schemes for first-timers, getting over deposit and affordability, and those with would-be buyers with more layered complexity.
These buyers may have multiple layers including the source of the deposit, plus any credit issues, and overall affordability in an environment (at least for the short-term) could see further rate rises.
It’s important that lenders don’t treat first-timers as one giant group, and instead tailor a product plan towards them. For example, this could be looking at professionals and their opportunity for sharper income growth from their qualifications and career progression or looking at those with multiple sources of income or individuals who might have a family tie and want to apply for a mortgage together.
The other elements that should be added, including the source of the deposit, plus any potential credit issues, and overall affordability in an environment, could see further rate rises.
If prices (as expected) go down, and as anticipated, inflation begins to fall in mid-2023 which causes further falls in mortgage rates, we might have a better environment for first-time buyers next year than we have had in the past few months.
Add in the stamp duty holiday that could act as a further catalyst for activity, and strong advice and a range of mortgage options for all types of first-time buyers do remain vitally important, when both the Government’s mortgage guarantee scheme and Help to Buy have effectively run their course.
From our perspective, we’ll continue to support first-time buyers throughout 2023. Overall, it’s up to lenders and advisers to present as many mortgage solutions as possible to as many purchasers as possible. Some may not even know they can secure the finance they need, others might think the market has shifted too far beyond their reach when this is untrue.
We have the appetite to lend in this space, and those who want to embark on the journey should be starting by utilising the services of a quality adviser who understands all the options available.
References:
https://www.mortgagesolutions.co.uk/news/2022/11/22/more-than-a-million-ftbs-put-off-purchasing-by-cost-of-living-crisis-aviva/
https://www.dailymail.co.uk/news/article-11434131/Is-pensioner-86-Britains-oldest-time-buyer.html
https://www.ftadviser.com/mortgages/2022/03/15/covid-pushes-up-average-age-of-first-time-buyers/
*This article was originally published on Mortgage Solutions
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