We’ve been trying to push the plight of first-time buyers up the agenda for some time now, after research we undertook in 2023 for our Home Truths report shone a stark spotlight on the issues they face.
Perhaps most stark among the findings were the fact 78% of first-time buyers said they fear homeownership is becoming an elite privilege, and the disclosure by 15% that they are putting off major life milestones like starting a family to try to get themselves into a homebuying position sooner.
The research also told us that, despite the hurdles involved, many people still see owning their own homes as life-affirming, with 37% of prospective buyers telling us that they aspired to purchase their own home within a year, despite the challenging market conditions.
However, despite spending months designing a new proposition we hoped would go some way towards handing would-be first-time buyers their keys to the door, even we could never have predicted the positive groundswell of feeling the launch of our £5k Deposit Mortgage in March unlocked.
We specifically designed this new product, which allows first-time buyers to access a mortgage of up to £500,000 with a deposit of just £5,000, to help this vital borrower group overcome arguably the biggest obstacle in their path – raising a deposit.
And it appears to be working. We have received broker feedback from customers who have cited the ability to finally go out and search for a home of their own as ‘life-changing’.
We’ve even had someone stood crying happy tears on their phone in the supermarket, in utter disbelief at securing themselves a decision-in-principle (DIP) months, or in many cases years, earlier than expected.
Most of these people are older than the age which used to be typically associated with first-time buyers, many have families already – and their relief at finally being able to put down roots via a property of their own is palpable.
One man in his early thirties was rejoicing that he would finally be able to move out from his parents, predicting, jokingly that they would be equally happy to get their home to themselves again, though perhaps less happy at losing custody of the family dog, which he planned to take with him!
Brokers have also shared their elation at securing new customers keen to access this product, and being able to help those they already knew about, who they’ve thus far struggled to assist over the threshold.
A much-needed breath of fresh air for them too, given the volatile market conditions they’ve battled to guide their clients through over the past 12 months.
It’s been truly humbling to see the human reality behind the statistics we already knew and our teams have been absolutely delighted at being able to genuinely help people and make a difference to their life prospects.
Of course, this was particularly welcome given the higher-interest-rate environment which we all know has added to the general cost-of-living strain on people’s pockets.
It has all, also, served as a timely reminder of what we’re here for, which isn’t to just build and sell financial products, it’s to facilitate people’s real lives through finance.
At Accord we talk about being ‘purposeful’ about what we do. It is the ‘why?’ that drives us, not the what, and if anything was needed to spur us on to do more of this stuff which really makes a difference, this experience has been it.
Something to build on
Of course, we’re also acutely conscious that solving the first-time buyer problem – along with others affecting the mortgage and housing markets at large – is not a one-lender, or indeed one initiative, job.
The complexities of today’s market and economic environment mean that a cross-industry, collaborative solution is needed, involving lenders, government and influencers across party allegiances, coming together to design bigger, bolder, more impactful answers to a very modern problem which is only going to get worse if we don’t act now to make it better.
That’s not to say there is a ‘silver bullet’ for this complex issue caused by a conflagration of historically high house prices, stretched affordability and the rental trap which makes it especially difficult for people to save up a deposit.
There is also that risk that must not be ignored of creating unintended consequences. While first-time buyers are a vital cog in the housing market machine, essential to keeping chains moving for second and third-time movers; offering too much or the wrong assistance can further over-inflate prices, compounding the problems.
It was with full awareness of the potential pitfalls that our team wrestled to get the design of the £5,000 mortgage right – reducing the entry level sufficiently to give would-be borrowers a chance while building in appropriate checks and balances to ensure we are lending responsibility and protect customers from risks like overstretching their finances or falling into negative equity.
For Accord, this has been a very thoughtful initiative – and the same principles will need to apply to any other industry moves to help first-time buyers.
However, at the same time, it’s important that we don’t allow such considerations, though important, to prevent us from acting. The time is very much now and in our Home Truths report, we called for cross-industry action to support not just first-time buyers but borrowers at large.
It is very clear from our recent experience that the great British love affair with property ownership lives on and we all have a duty to nurture that, and secure the vibrancy of the mortgage industry in the process.
Jeremy Duncombe is director of intermediaries at Accord Mortgages
