Bob Hunt is Chief Executive of Paradigm Mortgage Services
To say that industry comment around the Government’s FirstBuy scheme has been mixed, would be a gross understatement. While we would all accept that the scheme has its limits there seem to be some who believe Osborne and Co. would have been better off leaving the status quo as it was; the suggestion being that this scheme is music to the ears of property developers and no-one else, and that house prices will be keep at inflated levels because of the scheme’s introduction.
I, on the other hand, am quite positive about FirstBuy and can see it being particularly popular given that it tackles the key deposit-saving problem that many first-time buyers struggle with. Don’t get me wrong, there are many issues to be resolved with FirstBuy and, as always, until we see the full detail of the scheme we shall reserve full and frank judgement; however, anything that helps stimulate the first-time buyer market should be applauded. Let’s be fair, in this economic environment who was expecting any help for first-time buyers or the mortgage market, so this scheme (in that sense) should be welcomed.
The point about the scheme is that there is much that needs to be done around it; by this I mean that in isolation FirstBuy will have an impact but it will be limited. This is a scheme that comes with a number of caveats not least the pot itself - £250 million – is relatively small; it is only available to those who want to buy new-builds; you will only be eligible if you have an income – joint or otherwise - below £60k pa; and of the £250 million, £210 million is earmarked for England with the rest shared between Scotland, Wales and Northern Ireland.
Therefore, while I expect strong demand for the scheme there are going to be significant numbers of potential first-timers who will be not be eligible and will be left in the same position they were in before the Budget. So, while all the attention may be on FirstBuy the mortgage industry has a duty to remember those who won’t qualify and to come up with a variety of mortgage options which support those who earn more than £60k, or don’t want to buy a new-build, or may miss out on the scheme due to over-demand in Scotland, Wales and Northern Ireland.
This is where I believe the lending community must step up to the plate; yes, there are loans out in the marketplace, for example, Lloyds’ ‘Lend a Hand’ scheme which seek to tackle the issues facing potential first-timers. The point is that these should not exist in splendid isolation – greater product innovation and certainly greater dissemination of information to first-timers about the options available is necessary if we are to have any meaningful first-time buyer push in the next few years.
We should not forget how important first-time buyers are to the marketplace; if our most recent period of activity is anything to go by this is only too clear. It has been purchases not remortgages which have been the lifeblood of the market and, while the remortgage market has shown recent signs of life, purchases will continue to be vital. A purchase of a non new-build property by a first-time buyer can have a staggering effect on overall property transactions with anything up to five or six further purchases resulting from this first link in the chain.
Therefore it is imperative that we as an industry seek to find responsible lending solutions that enable people to get on the housing ladder. I’m sure many advisers will know of countless potential first-time purchasers who, based on affordability calculations, would be able to easily make their mortgage payments each month. The problem has, and is, the securing of the deposit to gain finance in the first place, which is why schemes which utilise joint deposit-funding arrangements such as FirstBuy, or shared ownership, or even the Bank of Mum and Dad, must be added to and improved upon.
One would imagine that FirstBuy, and all its attendant publicity, will bring many first-timers flocking to advisers. The Scheme looks likely to start in September however advisers can use the time in between to consider eligibility and, if the individual is not going to qualify, to educate and inform individuals about the other options that could be available to them. It is to be hoped that during this period lenders seize the initiative to design and issue new products capable of satisfying this market, and that advisers are able to secure these clients and help them proceed towards a purchase.
This may not be a quick-fire transaction for advisers but more of a slow-burn, however with a strong service proposition with quality advice at its heart, they should reap the reward of a long-term client relationship. This may be the first housing transaction that these people ever make, but it will probably not be the last, plus there is the added issue of referrals to be considered. Taking the time to offer information and support to the first-time buyer, coupled with a renewed and invigorated product landscape, will be central in developing an improved mortgage and property market for all.
