I’ll freely admit that it’s not particularly cutting-edge or surfing the zeitgeist wave, to begin your article with a quote from a film, Field of Dreams, which is over 30 years, stars Kevin Costner and is essentially about the ghosts of long-dead baseball stars turning up to play in an Iowa cornfield.
But it says something about the film that its most famous line lives on and somehow still resonates now. A show of faith in a goal or ambition, a determination to do something when perhaps others suggest it’s not worth it, a focus on a project and end result that seems somehow impossibly out of reach.
I suspect that many wannabe first-time buyers feel the same way about home ownership, that the odds are stacked against them in so many ways and that, even with degrees of support or government schemes, that it requires ‘blind faith’ to actually keep going in the pursuit of that first home.
Some in our industry like to point out that it’s always been this way when trying to get on the ladder. That generations of first-timers have always had obstacles to overcome, obstacles that seemed insurmountable at the time, but with a commitment to saving enough deposit, to giving up on certain things in life, etc, that the achievement was always possible.
In my view, this tends to be a rose-tinted perspective. Yes, it might have been hard at the time, but put yourselves in the shoes of first-time buyers now and question whether you’d be able to achieve home-ownership in this current economic environment, with the dearth of supply, with house prices at their current levels, with the shortage of high-LTV products, with the affordability criteria that needs to be met, the list goes on.
For many it’s only achievable with significant support from the Bank of Mum & Dad/Grandma & Grandad, so what is it like for those who don’t have that luxury to fall back on? It’s beyond difficult is the answer.
Which is why perhaps the recent foray back into high LTV territory by some lenders – feeding off the catalyst provided by the government’s guarantee scheme – has resulted in an immediate increase in interest.
Recent figures from MBT suggest that searches by advisers for 95% LTV loans have increased eight-fold since the start of 2021, no doubt fuelled in part by potential new owner-occupiers hoping their 5% deposit can now get them the mortgage that many, many borrowers in the recent past were able to rely upon as a matter of course.
Of course, advisers will be only too well aware that having that 5% deposit is just the start of the process and a lot will depend on lender appetite – there are still only 30-plus products available right now compared to more than triple that pre-lockdown 1, the tranche of funds available, the pricing, and the strictness of those affordability criteria measures that would-be borrowers have to get over.
Average house prices are in the £250k region, which means a borrower would need at least £12.5k, or parental support that can help provide this. What we are however likely to see is a growth in 5% deposit mortgage options, but I also tend to agree that the affordability and criteria levels set could be much more flexible, although lenders are hamstrung by the rules and regulations in that regard.
We can however see more positives than negatives right now than just a few months ago. The government approach is helping build the low-deposit mortgage market and without that, many first-timers would not even be able to consider home ownership. Even if we don’t see a massive take-up by lenders of the guarantee, what we’ve already shown is the impact it is having on lenders to once again enter the game and show their hand early.
Through this month and next that product supply will undoubtedly grow helping more first-time buyers into their first homes. If we can also build a less stringent approach to affordability – one that doesn’t rely so heavily on SVR plus 3% stress tests – then I’m certain we can help many more borrowers make that first purchase. After all, large numbers are paying more in rent now than they would do for a mortgage – that should be proof of affordability, shouldn’t it?
We must continue to build more confidence in the high LTV space, because as the numbers already show, by doing that, those borrowers will continue to arrive.
Patrick Bamford is business development director at AmTrust Mortgage & Credit
