Over the past two years, the housing market has been affected in ways which could never have been predicted. While restrictions in the UK have eased, the market is still of great interest.
During 2021, house prices raised by more than 10%, the fastest growth in 15 years (1). But, what effect has this had on first time buyers, and how can lenders continue to support them and what are the options available?
Saving for a deposit has been long known as barrier to entry for many, however with rising house prices and more recently, rising inflation, this has only become more difficult. The return of high Loan to Value (LTV) mortgage products across the market is important to support these types of borrowers. Many lenders are now offering 95% LTV mortgages, reducing the amount of deposit required. High LTV mortgage products are key to supporting the majority of first time buyers looking to enter the market.
However, there will always be a number of first time buyers who want to make that first step on to the property ladder, but simply cannot afford the deposit required. This may be down to many things, from rising property prices pushing up the amount they need to save, or rental payments making it difficult and timely to get to their goal. There are other options available to support these borrowers, including 100% LTV mortgages.
These are offered by a number of lenders. Typically, branded as assisted mortgages, the amount of deposit required is dramatically lowered to 0% or some lenders will even offer a flexible deposit scheme. Flexible deposit schemes will allow the borrower to put down whatever deposit they can reasonably afford, even though this may not be the usual 5% or 10%.
While these mortgages allow applicants to obtain a mortgage with little or no deposit, they very often require further support from a family member. Family member support can be provided in a number of ways from depositing savings into an inaccessible account with the lender, to accepting a charge against their own residential property.
While this can provide support to some, there may still be some who’s family members will not be able to facilitate this type of support. The importance of first time buyers in the market cannot be ignored.
To support them in entering the market, the Government also have a range of options available. From boosted savings via the Help to Buy: ISA, or more recent Lifetime ISA, to equity loans, shared ownership and the new mortgage guarantee scheme – there are a range of options available. All do come with their own terms and conditions, which may be restricting to certain borrowers (e.g. equity loans are only available on new build properties).
Finally, with the average age of first-time buyers currently at 32 (2) , many can be new to credit and so have not had the opportunity to build up a strong credit score. With credit scoring lenders, such as large high street banks, this can mean an automated decline for any mortgage application purely due to a lack of historic credit.
An alternative approach taken by some lenders, usually regional building societies, is the manual underwriting process. This process means that lenders will review the applicant in a deeper light, looking at their credit history rather than their score alone. Doing this allows for lenders to take a common-sense approach rather than basing their decisions on automated scoring systems and can make it easier for first time buyers to obtain a mortgage.
So, while the market continues to be a difficult playing field for first time buyers, there are lenders out there actively looking to meet the needs of this important part of the market. Higher loan to value mortgages, personalised underwriting and strong, yet robust, affordability calculations will all play a part in putting these borrowers in their first homes.
If you would like to learn more get in touch with our expert Mortgage Broker team via:
t. 01603 343007
e. info@broadlandconsultants.com
Or book and appointment here: https://www.broadlandconsultants.com/contact-us/
If you’re based in Norwich or Norfolk, our expert mortgage brokers can meet you face to face too. (Phone or Video call appointments also available)
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
1 https://www.theguardian.com/business/2021/dec/30/uk-house-prices-in-2021-show-fastestgrowth-rate-in-15-years
2 https://www.idealhome.co.uk/news/average-age-of-first-time-buyers-uk-300275
