As I write, the latest monthly house price information has been revealed by Nationwide which shows a monthly fall in prices by almost £4k, taking the average UK price down to £268,282.
For a first-time buyer it might seem like something of a positive to see prices falling, after a period when they probably thought they could only go in an upward direction.
However, as we know, the major obstacles and barriers to owning that first home tend to be deposit-related, and certainly over the last month or so, this has been exacerbated by the rise in mortgage product pricing, the squeeze on affordability and the tighter criteria applied by many lenders.
Addressing those issues, it is informative to acknowledge that the Government’s own Mortgage Guarantee Scheme is due to finish at the end of the year, and while it may not have set the world alight in terms of mortgages completed under its terms, what it did undoubtedly do is act as a catalyst for greater provision of high LTV mortgages.
As you will know, prior to the Scheme’s introduction, we were down to barely a handful of 95% LTV products available, and relatively quickly that grew to a point where you could count them in their hundreds rather than on one hand.
Now, however, we can see what the market turmoil has meant for high LTV product choice. A quick cursory search using the Nationwide’s recent house price figure shows we just about scrape over 100 95% LTV products with most of the ‘best’ rates being discounted products, rather than the fixed-rate certainty that many first timers might crave.
This might seem like a major requirement in an environment where the cost of living has increased so rapidly, particularly for energy and food bills. Plus, as you will already know, the fixed-rate products on offer are currently at least in the high 5% region, with most over 6%, presenting – as mentioned – issues for many wannabe buyers in terms of whether they can currently meet lenders’ affordability criteria.
In recent years of course, the Bank of Mum & Dad has been relied upon more than ever to help first-time buyers onto the ladder, however with the initial rise in 95% LTV mortgage availability, it was widely hoped that this reliance might not be so acute.
Now, however, it looks like would-be borrowers will increasingly be turning to their parents/grandparents and family members in order to help them out of their predicament, whether it’s the ongoing deposit issue or in terms of meeting affordability and ensuring they can keep paying the mortgage.
To that end, we’ve noticed an uptick in the number of queries to our Mortgage Helpdesk around potential options for those first-time buyers who are, in some way, being helped by their family.
The good news here is that the market is increasingly catering for a variety of means and methods by which the family can help. So, for example, Joint Borrower Sole Proprietor has been something of a hot topic recently, with advisers wanting to see what lenders will look at a higher age limit for the older borrower. A number of building societies will offer this.
And while we have Guarantor options for a number of lenders, there are also ‘Family Assist’ type products which allow the lender to take a charge on the asset(s) of the family member who is providing the assistance, such as their home or savings. It can be useful for those family members who are asset rich, and is available to those first-timers who have a little, or even no, deposit.
The plight of the first-time buyer in this higher-rate mortgage environment is likely to be on the agenda for advisers, and indeed, the Government in the months ahead. We await to see, for example, whether there will be any replacement announced for Help to Buy which has now effectively finished, or will the Government now hand this over to the industry to find a solution with our own schemes?
Perhaps the not-so-Mini Budget/Fiscal Event will provide further support? We do not know. However, as is always the case, advisers can’t rely on a scheme or Government intervention that might not come over the horizon.
Neither can first-time buyers and so, for the fortunate ones, they are likely to turn to their family to help them get to where they want to be. The good news is that lenders are very active in this space, and we continue to urge them to provide as many solutions as possible in order to help the new blood that is vital to our market, onto the ladder.
Bob Hunt is chief executive of Paradigm Mortgage Services
