Steve Walton is national development manager at Mansfield Building Society
You may have missed it but the Moneyfacts’ article about the number of first-time buyer deals dwindling in August was intriguing. According to the release, the number of 95% loan-to-value mortgages has drastically reduced from 270 in March 2016 to 225 in August 2016.
Whilst affordability is certainly an issue for first-time buyers and their first step on the housing ladder continues to be an increasingly expensive one, having fewer products available is likely to compound the issue as borrowers have fewer providers to choose from and therefore less options available. Further, the increased use of automated credit scoring and system driven decisioning adds to the challenge for those housing ladder virgins with slightly unusual circumstances hoping to get onto the first rung.
Not only do we need high LTV products to support first-time buyers but we also need lenders that cater for real customer circumstances. Individual underwriting is a must if the industry is to meet the mixed and varied circumstances aspiring homeowners find themselves in these days.
For example, there is little argument about how hard it is to save a minimum deposit, especially for those currently renting – it is therefore no surprise that the Bank of Mum and Dad is becoming increasingly popular, not only for help with gifted deposits but also to provide assurance to lenders as willing guarantors. Other innovations are becoming increasingly common including the use of rent-a-room income in calculating affordability, and mates’ mortgages where a group of like minded individuals come together to help make home ownership a reality.
So why aren’t lenders doing more to support first-time buyers? It’s an obvious market segment that lenders should be supporting isn’t it? After all, first-time buyers are the key ingredient in a healthy functioning housing market aren’t they?
So why is there such anxiety at this time if first-time buyers are such a key ingredient?
Results of the government’s July House Price Index reported monthly buy-to-let mortgage approvals below 2015’s number with a definite slowdown following the introduction of April’s taxation changes. It’s true that the increased taxation has certainly shaken up the housing market by making entry more expensive and the ongoing rewards a little less attractive for most aspiring landlords.
So, more properties and less activity – this should be a good thing for first-time buyers. So why isn’t the market booming and why aren’t lenders fighting more fiercely over this precious commodity?
Truth is, borrowers and lenders remain a little nervous, neither knowing nor daring to predict what the financial world might look like in post-Brexit Britain.
Sure, we may be in for a little turbulence as we readjust our relationship with our European neighbours but I think we can be confident that the world isn’t going to stop, that people will still need housing, and that jobs will still need doing!
Last week Mansfield Building Society launched a new 3-year fixed rate mortgage at 95% LTV.