First up, may I wish you all a very happy new year and, despite 2023 having some clear challenges for the advisory and lending community and our clients, I believe 2024 has the potential to provide a far greater number of opportunities and a return to a market where activity levels have improved and so has income generation.
Certainly, it is early days but the market appears not to be resting on its laurels and we have already seen a considerable number of product and rate moves as lenders seek to up lending levels and potentially regain some market share.
Where might business come from is a constant question being asked by all mortgage market stakeholders, and while it’s been clear that product transfer activity has been significant, there is an argument to be had that 2024 will be much more conducive to greater levels of purchasing and remortgaging.
Rates began to fall in the lead up to Christmas, and again it is early days, but that shows no sign of stopping just yet. And, for those who have been put off or simply unable to get started, because of higher rates impacting affordability, mortgage pricing coming down will be an opportunity.
That’s certainly the case for first-time buyers who, when coupled with house prices being subdued over the last 12 months, may find further opportunities to make a move onto the ladder this year.
There appears to be a growing cohort of wannabe buyers who are looking to do this, and as a specialist lender active in this space, it was noticeable just how strong our first-time buyer business was, particularly over the last quarter of 2023.
This might well be one of the more potentially surprising features of the last 12-month period – the resilience of the first-time buyer sector and how, even with a number of notable obstacles in their way, an increasing number of first-timers were able to get on the ladder as the year progressed.
The latest statistics out of UK Finance show this. Not only were the number of mortgage advances for first-timers more than for home movers in every quarter since Q2 2021, but this number showed a marked increase in Q3 2023, up towards 80,000 – the best three-month period of the year.
Now, we’re clearly not suggesting that 2023 was somehow a big year for first-time buying in general. The numbers were still down on the previous two years, but as we move into 2024 the ground appears much more fertile for first-timers than it has been for some time.
As mentioned, rates falling is good news, but so is the greater number of higher LTV products available, plus there appears to be a growing noise coming out of Government that it will use the March Budget to find further support for first-timers, perhaps a replacement for the Help to Buy Scheme, Government intervention to deliver longer-term loans, plus suggestions of further action when it comes to stamp duty, or indeed all of the above and then some.
What we must also highlight with first-time buyer activity is the far greater array of options available to them, particularly when it comes to specialist mortgage products for those who can’t meet the requirements of the high-street but are still good credit risks, but may need something beyond the vanilla.
There’s no doubting this type of borrower, and their varied needs and circumstances, can now be accommodated much more by lenders such as Foundation. Whether that is a first-time buyer with a lower credit score, or an unusual source of income, those who may have picked up some credit blips particularly through the various lockdowns, or those who have multiple incomes, they all have mortgage options.
Then you have professionals who can quality for higher income multiples because of their career choice, those who are using the Bank of Mum & Dad in terms of deposit accumulation, or those who have a complex income setup potentially reliant on bonuses or commission at different points in the year.
Previously, all of the above might have been a sticking point particularly for a first-time buyer who had quite obviously never had a mortgage before, and who may have been seen as too much of a risk to take on.
Now, that assessment can be very different, which means – especially in a better rate environment – we are able to look individually at these cases and get them into a positive position with a positive lending decision delivering a positive outcome.
We know in the UK the deep-seated ambition many people have to own their own property, and it all has to start somewhere. My view is that first-time buyer activity will continue to grow, and with a greater number of products available – especially in the specialist sector – the more Foundation will be able to help those who want to fulfil this need.
Grant Hendry is director of sales at Foundation Home Loans