Ask the Experts: What options are available at high LTVs?
Q: What is being done to help first-time buyers? I see lots of changes at the low LTV levels but few options for those typical small deposit first timers.
A: We’re not far into 2013 but we have seen the introduction of several innovative products aimed specifically at getting new homeowners onto the property ladder. But is it too early to hope that 2013 will be the year of the first-time buyer?
In 2012, the government introduced its Funding for Lending Scheme (FLS), which gave banks and building societies access to cheaper funds for loans. However, only now are we starting to see the benefits of the programme in earnest, with fierce competition among lenders to attract the ‘ideal’, low risk, borrower coming to the fore over the last six months.
The latest lender to take advantage of the FLS scheme to announce an offering designed to assist those not yet on the housing ladder is the Lloyds Banking Group, who recently pledged to lend £6.5bn to first-time buyers (FTBs) this year.
This impressive sum has been in part subsidised by the FLS, from which Lloyds Banking Group has so far drawn £3bn. Lloyds’ offering is most definitely a step in the right direction and will no doubt help to give the housing market a boost, however, as with a large number of products currently available, it is still largely aimed at a select few who fall into the ‘low risk’ category of lending. As a result of this, there remains a large number of first-time buyers who fall outside of this category and are thus underserviced, with low risk lending becoming increasingly commoditised and overcrowded.
So what is available for those with a lack of capital?
Elsewhere, Barclays launched its Family Springboard Scheme, which offers buyers a 95% loan-to-value product at a three year fixed rate of 4.69%. The buyer’s family act as the guarantors for the mortgage, as they are required to put 10% of the house purchase price into a savings account with the bank, which they aren’t able to touch for three years.
One of the major selling points of this scheme is that it offers even first-time buyers with small deposits some of the lowest rates available, addressing one of the most pressing issues surrounding the housing market, and moving away from the heavy focus we have recently seen on low-risk lending.
With the introduction of these and similar products, this year is certainly looking brighter for first-time buyers. However, in order to achieve the much needed market growth, it is paramount that more lenders offer deals which cater to the wider market and move away from the attitude of cherry-picking borrowers.
With lenders reassessing their lending criteria, more first-time buyers will be eligible for mortgages, and the property market will finally be able expand for the benefit of both the consumers and the economy as a whole.
Lenders and the government need to work together to address the underlying issues which are currently hindering this process, such as the lack of suitable products and available housing, to ensure that 2013 really is the year of the first-time buyer.