As the initial tapering of the stamp duty extension begins, it’s clear that increased attention is being placed on first-time buyers as the industry looks to maintain forward momentum across the housing and mortgage market where possible.
The temporary reduction in stamp duty, alongside a raft government initiatives such as the shared ownership scheme and Help to Buy initiative, have certainly helped to light a fire under the housing market over the past 12 months or so. However, it’s evident that first-time buyers will need more support than ever throughout the homebuying process.
A selection of the challenges facing this vital band of borrowers were highlighted in the latest research from the Building Societies Association (BSA) which suggested that, for the first time in nine months, raising a deposit returned as the biggest barrier to buying a property (59%). During the pandemic, a lack of job security was cited as the greatest concern, but this has steadily declined to less than half the respondents (45%) from a reported 68% in September 2020. Whilst this drop certainly represents a welcomed trend, it remains concerning to see so many people still feeling unsure about their long-term employment prospects.
There’s also growing expectation that house prices will continue to rise, with half of the respondents (50%) expecting further price increases over the next 12 months. This compares to just a quarter of people (25%) in December and is in stark contrast to the same time last year when 45% of people thought prices would fall. In addition, 30% of people think now is a good time to buy a property, less than the 37% who thought so in March. This is likely to be a reflection of the looming stamp duty holiday deadline and an ongoing increase in house prices.
Staying on a positive note, it’s evident that lenders are becoming ever more competitive in line with growing demand with the number of available mortgage options on rise, even at the higher LTV bands. According to data from Moneyfacts on 1 June 2021, 4,243 mortgages were suggested to be available to borrowers. This figure represented a rise from 3,927 available deals found on 1 May 2021. Year-on-year the number of mortgage deals was said to have increased by 1,433, up from a total of 2,810 on 1 June 2020. It was also encouraging to see increased choice and competition emerge at the 95% LTV band which saw the largest increases with 192 products now available, an increase of 80 from May.
As we (hopefully) enter a post-pandemic world, the desire and demand for homeownership remains strong. Although it’s vital that lenders don’t ignore the ever-changing issues facing existing and potential borrowers. Thankfully, confidence remains high throughout the housing and mortgage markets.
Additional government initiatives in the form of the Mortgage Guarantee and the First Homes schemes will help generate additional borrowing solutions. As ever, its falls to borrowers, intermediaries and lenders to recognise the viability of such schemes but there are certainly plenty of reasons to be optimistic for all links in this mortgage chain in H2 2021 and beyond.
David Lownds is head of marketing & business development at the Hanley Economic Building Society