We need to find solutions for first-time buyers

Mortgage Introducer

July 12, 2018

Richard Adams is managing director of Stonebridge Group

The trials and tribulations of today’s potential first-time buyers are widely known and, even with significant amounts of government support in terms of Help to Buy and the stamp duty ‘cut’ for those purchasing under £300,000, there are still significant obstacles to overcome. Not least the ability of first-timers to save up for that first deposit – still without doubt the biggest hurdle that new purchasers will have to get over and even with house prices seeming to plateau slightly in recent months, it might be deemed the ‘impossible job’.

Certainly, when it comes to getting on the first rung of the property ladder, many individuals must believe that – without financial support from parents or grandparents – they have no chance. The much-discussed Bank of Mum and Dad is being called upon with greater regularity, and I sometimes wonder whether we are reaching a point where the idea of owning a home without needing that financial support becomes a pipe dream.

Reading the latest research from Lloyds Bank on the housing market, the omens for first-timers are not good because it suggests that it’s not just those poised to get on the first rung who need that parental cash these days. Instead, those who have managed to get into a first property are increasingly having to look to family and friends for help as they seek to move up the ladder. If that’s the case then are we reaching a point where the Bank of Mum and Dad never really closes its doors, or perhaps gets paid back? It’s just expected to keep supplementing its offspring throughout their lives?

The Lloyds’ report said approximately a third of second-steppers have to borrow/accept more money from friends or family in order to move home. The amount needed is also rather staggering – it has increased by £4,200 to just over £25,500, and a significant 58% said they simply wouldn’t be able to move if that money wasn’t available.

So, where does this leave us? Well, undoubtedly we’ve seen a whole raft of mortgage products introduced in recent times utilising the Bank of Mum & Dad and that is understandable given the support (both financial and emotional) they’re providing. However, what worries me from this research is that we appear to be moving towards a point where parental/family/friend support is required further and further up the ladder. Let’s be honest, that financial support is not a bottomless well that prospective and existing homeowners can draw on forever; we cannot expect the housing market only to function if that cash is available because when it’s not there anymore, what happens?

I am conscious however not to be too negative here because there was some positive news within the Lloyds’ research, namely that second-steppers felt market conditions had improved since 2017, this group were still managing to save (over 65% were) while 47% were actually overpaying their mortgage. So, incomes were strong enough to allow them to do this, but the big problem is making that move up the ladder, finding a bigger property for example, and here the gulf is proving difficult to breach because house prices at the next level can be considerably more.

That said, having a market where parents and grandparents, other family members and friends are willing to support first-timers/second-steppers is a positive for those that can benefit. But we must also be conscious of those who don’t have access to that support and I was been recently heartened by the increase, for example, in the number of high LTV products that lenders continue to issue. Indeed, many in the specialist/challenger space appear to be looking at high LTV as a ‘specialist’ area and making their moves in order to benefit from the heightened interest, for example, in first-time buyer activity and what they might require once they look to move on.

This is the type of movement we should be encouraging from our lender partners, as well as a continuation of the range of guarantor/family support-type mortgage products that are going to help more people secure their property-owning futures.

We are undoubtedly on the right track, and the simple fact that the struggles of those at the bottom of the ladder are so high up on the political agenda, is also something to welcome. We do not want the market to move out of reach of those who want to grasp home-ownership or move up the ladder, and a continued focus – particularly on high LTV products – should ensure far more of our younger clients get to their end goals, with or without family support, and that they are able to move to other properties without necessarily needing that support in the future.

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