I was intrigued to read, on these very pages, broker’s views of the market at the latest Mortgage Solutions’ Supper Club which took place in Southampton. In particular, the analysis of what they saw as the most difficult market to service in the current environment, the first-time buyer sector.
For all the government’s talk and schemes focused on increasing the number of first-time buyers in the UK, the advisers in Southampton seemed adamant that getting new borrowers onto the property ladder remains the biggest challenge to overcome.
To hear that many advisers believe only those with gifted deposits have a chance, or to suggest that they ‘sit and pray’ for low-deposit borrowers when it comes to making it through lenders’ tighter affordability measures, will perhaps make uncomfortable reading for the government. This is all the more worrying considering that when the Help to Buy 2 scheme was ended, it was suggested that the provision of high loan-to-value (LTV) mortgages is now back to normal.
And Southampton I suspect is no different to all other areas of the country. The difficulties facing first-time buyers remain in terms of finding the deposit, plus of course higher LTV mortgage lending is seen as higher risk and with the increased affordability constraints, it has become much more difficult to secure a mortgage. Are lenders, in this sense, being truly encouraged to lend in this part of the market, especially now HTB2 has ended?
What will be incredibly galling to many would-be purchasers is that rents continue to rise, and were it not for the deposit issue and the hoops they are having to jump through, their projected mortgage payment would be far less than the rent they are currently paying. Affordability in that sense may seem slight skewed to those who want to move away from the private rental sector but find themselves fighting a market which continues to seem out of reach.
There are, however, some small slivers of hope for both advisers and their first-time buyer clients. Even with the demise of HTB2, lenders appear to be – with some notable exceptions – still active in higher LTV lending. Many are utilising private mortgage insurance in order to de-risk and, while the market is ‘affordability tough’ there are still 95% LTV products available, albeit not as many as we would wish.
Interestingly, with the pull-back in buy-to-let lending, we might have anticipated a number of lenders upping their high LTV lending, however, at present it appears they are more interested in the lower LTV ‘underserved’ sections of the mortgage market. This is a competitive part of the market though and again still comes with a greater degree of risk – it may well be that as the year progresses, lenders turn once again to the first-time buyer sector in order to secure volume. Even with this, I suspect advisers will find that this is one area of the market that will remain a hard slog for both them and their clients. Unfortunately, they too are ‘underserved’ even if there are tools that will support greater activity levels.