The government’s Levelling Up White Paper focused heavily on the housing market, specifically looking at what it might do to turn, in its words, ‘Generation Rent into Generation Buy’, and to increase the number of first-time buyers in every region of the country.
There’s no doubt that first-time buyer activity – and improving it – has been front and centre for numerous governments over the last decade or so, with the introduction of the Help to Buy Scheme in particular being something of a ‘flagship’ policy.
Now, however, that scheme is only just over a year from ending, and the Levelling Up document outlines how the government wants to continue upping the number of first-timers, upping the supply of affordable homes, and ensuring that both first-time buyers and local buyers are at the front of the queue when it comes to new developments.
That might be construed as easier said than done, however there is a decent foundation – if you’ll pardon the pun – to build from, as the number of first-timers getting onto the ladder hit a 20-year high in 2021, increasing some 35% year-on-year, while according to Zoopla first-time buyers accounted for 50% of all people purchasing a property with a mortgage in 2021.
Supply is key here, but so will be access to mortgage finance because we’re all acutely aware of how tight affordability criteria impacts on first-timers getting the loans they need. And, specifically, as we are coming out of the pandemic and we are seeing a new environment, it will be intriguing to review just how first-time buyers are catered for, particularly those who might not meet the criteria of high-street lenders.
In that sense, you can see a much greater need for specialist residential mortgages for first-time buyers, who come looking for their first property with, for example, complex income, multiple sources of income, perhaps some minor credit blips as a result of the pandemic, or are not able to secure the mortgage loan amounts they require to purchase homes.
Lest we forget that, according to a large number of indices, house price increases are running at double-digit levels, and despite the government’s continued commitment to meeting its 300,000 new homes a year target by the mid-2020s, we appear to be some way shy of that.
First-time buyers are also not competing just against themselves in this market, and again it is interesting to read in the White Paper that the government is looking at ways and means to ensure they can access properties and others can’t – such as landlords.
However, demand is incredibly strong in the UK market, and coupled with our levels of supply, first-timers might well be feeling that house price rises are moving owner-occupation further away from them.
There is, of course, good news in all of this. The provision of high LTV mortgages has increased significantly, mainly as a result of the governments’ further intervention via its Guarantee scheme, and for certain first-timers there are products available with enhanced income multiples to bridge the value gap.
We, for instance, offer products for professionals at higher loan-to-income levels, for those first-time buyers currently practicing and holding a relevant qualification across a number of eligible professions including accountancy, medical, legal and the like. For those at the start of careers which have longevity or a higher income path, this can offer a key opportunity to secure the income multiple they need in order to secure a larger mortgage to purchase a higher-valued property.
As a specialist lender, almost our entire residential product range is available to first-time buyers, including products in all LTV bandings and products in every credit tier. Our criteria is also specifically geared up towards those first-time borrowers with gifted deposits from the wider family, or have had a short stint of time in employment, or who want to buy as four family members.
There’s no doubting we need to see ongoing levels of new blood entering the property market, and in order to do this, specialist lenders in particular need to look where the demand and need is, and tailor propositions accordingly.
Wanting to own your own home is a key part of our culture and democracy, and it’s heartening to see first-timers being provided with a greater number of opportunities to do this. This is an area where we need to keep our foot on the pedal though, in terms of providing access to advice, finance, and ensuring the supply of affordable homes grows. If we can maintain the above, we can maintain (and improve) first-time buyer numbers both now and in the long-term.
Mark Whitear is head of commercial development at Foundation Home Loans