Understandably, there is something of a buzz around the mortgage market at present especially with the launch of a number of new lenders and the re-emergence of those, such as CHL Mortgages, who look likely to return to lending soon. That said, we are (on the whole) talking about new ‘specialist lenders’ operating in niche areas of the market, rather than a new breed of lenders fishing in more mainstream waters.
There’s quite simple reasons for this of course, from both a regulatory angle as well as a pricing perspective. How can this new breed compete with the ‘big six’ in the prime, mainstream mortgage market? The answer is, on the whole, they can’t and, at the moment at least, they don’t wish to.
However this is not to say that what we might once have called ‘mainstream borrowers’ couldn’t benefit from a new influx of lending blood.
Unfortunately, there is a growing tide of issues to overcome for first-timers and lenders in particular, including problems with capital requirements for higher loan-to-value (LTV) loans and the lack of capital relief for those lenders looking to use private mortgage insurance.
There’s no doubting the building society sector in particular is doing its bit to maintain first-time buyer lending appetite, but the figures do not currently lie. Take away the Help to Buy: mortgage guarantee scheme in 2017 and, judged on the current figures, you are taking away close to 70% of all high LTV lending. That drop is considerable, and it would leave the government’s drive to get more first-time buyers on the property ladder severely diminished, perhaps even obliterated.
In this type of scenario, advisers might feel slightly nervy. Indeed, we could be looking at something of a perfect storm with first-time buyer mortgage activity trailing off at the same time as government intervention brings about a slowdown in buy-to-let activity. There may not be a lack of the willing when it comes to first-time buyer potential purchasers but there could well be a tangible lack of low-deposit finance to make their dreams a reality.
In that regard, perhaps questions now need to be asked of those lenders participating in Help to Buy 2. Some are already slipping out of the scheme and offering products outside the scheme, but what will be their appetite to lend in this space from next year?
This should be a major industry concern and, given that it is tied up with government’s housing priorities perhaps we should be getting more information about, what comes next? It’s ok talking about getting more first-timers in their homes but unless they are cash buyers, then mortgage availability is crucial. If we continue to see this being cut then we can all forget about hitting targets for some time to come.
