A YouGov survey commissioned by Countrywide has just confirmed that 42% of all UK adults between the ages of 18 and 34 say that being unable to afford a deposit is the main reason for not buying property.
Hardly a shocking new revelation, but it’s nonetheless an important statistic because it underlines the ongoing plight of first-time buyers. Despite new government schemes being launched and protestations from the large lenders that they are trying to help struggling first-time buyers (their words, not mine), the issues holding back the housing market seems to have changed very little over the course of the past year.
Clearly, I have a vested interest in seeing an upturn in house sales, but the housing market means far more to the British economy than simply bolstering the new business statistics of a few mortgage lenders. Housing sales create jobs in construction, manufacturing and retail and generate revenues for HM Treasury.
And, at a more fundamental level, the construction industry needs encouragement to build more houses. New housing starts in 2011 fell bellow 100,000 at a time when there should be at least 250,000 new houses built each year in order to keep-up with the housing needs of the nation. A healthy housing market benefits everyone, not just lenders.
So why are lenders not doing more to support schemes such as NewBuy?
Unfortunately, large lenders continue to focus on other priorities, such as rebuilding their balance sheets and bolstering their capital ratios. High LTV lending requires more capital to be set-aside, which is why more lenders are not falling over themselves to develop products for hard-pressed first-time buyers.
Smaller and newer lenders, including Aldermore, have both the appetite and ambition to develop new schemes and to participate in government initiatives (as the Chancellor confirmed in his budget speech, when he named Aldermore as one of the founder lenders participating in its flagship National Loan Guarantee Scheme. We’re also in discussions regarding NewBuy). It’s a shame, however, that more lenders aren’t putting their weight behind such initiatives, because they have the potential to make a real difference.
It’s even more of a shame that some financial institutions are pulling out of 95% lending altogether, because not only does this remove an option for first-time buyers, but it also makes those lenders who remain in the 95% market also reconsider their options, as they run the risk of being flooded with higher volumes of new applications. The reduction in 95% lending further underlines the importance of government schemes such as newBuy.
The UK housing and mortgage markets needs every ounce of encouragement they can get, which is why we need to see more lenders supporting initiatives designed to help first-time buyers. And the sooner the better, because we can’t afford to wait another year before we see progress being made in addressing the same old problems.