January 21, 2013

Brian Murphy is head of lending at Mortgage Advice Bureau



Having queried in my last blog whether the benefits of the incentivised funding flowing into the mortgage market would be shared with first time buyers, January’s cold snap has at least brought encouraging signs of growth and innovation in this part of the market. 


The latest Regulated Mortgage Survey from the Council of Mortgage Lenders made it clear for all to see: 8% more loans were made to first-time buyers in November than October, and a full 24% more compared with November 2011.


The fact that, for two months running, first-time buyers have accounted for more than 40% of loans in the market is a surefire indication that they are being invited in from the cold and any lingering sense of being frozen out of the market will hopefully be short-lived.


Even so, two parallel trends are worth considering alongside this growth in lending.


Firstly, the CML data shows the average loan to value (LTV) for first time buyers has remaining lodged at 80% since November 2011.  Secondly, the Office for National Statistics’ latest House Price index for November 2012 revealed that, with the value of house purchase applications having risen over the 12 twelve months, first time buyers experienced more of a rise than the overall market (2.7% vs. 2.1%). 


MAB’s National Mortgage Index tells a similar story in terms of the overall increase in house prices, with the year to December 2012 bringing a 13% increase in average purchase deposits to £64,325, along with a 9% rise in the average purchase mortgages to £150,427. So if prices are growing across the board, and the LTV ratio for first-time buyers is much the same as a year ago, it begs the question: where are the funds coming from to help them afford the deposits to put down roots as new homeowners?


Unsurprisingly, the trail leads partly back to the door of the ‘Bank of Mum and Dad’. 


Having weathered the recession, the CML figures suggest this trusted institution was responsible for helping out 65% of first-time buyers in 2012, compared with just 31% back in 2005. 


So perhaps we are entering a period where the need for family support to access the property ladder is becoming a basic fact of life – a standard part of the transition from rented accommodation to owning the keys to your own home.


Or perhaps, along with ever cheaper rates from lenders, we are about to see the beginnings of a flurry of innovation from product providers, as they adjust to this new reality and look for new ways to ease people’s path to their first property purchase. 


This would certainly seem the case with Barclay’s new ‘Family Springboard’ product:  complementing its 95% LTV with an arrangement whereby family members put forward 10% of the purchase price in a linked savings account.


If not outside, things are certainly heating up in terms of competition between lenders, and for anyone looking to buy or even remortgage their home, that can only be a good thing.





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