Some of the increase is inevitably a bit of froth (rather than a bubble!) ahead of the end of the Stamp Duty concession in March, but it does show that there are buyers out there still keen to take the plunge into property ownership.
First time buyers increased from 12% in Q1 2007 to 16% in 2011. This suggests a level of resilience in the sector and that even in this age of austerity the aspiration of home ownership remains very much alive.
The question is whether existing and in particular new lenders are doing enough to support first timers.
On a positive note, there is little doubt that the availability of higher LTV lending has increased significantly in recent months. Openwork’s analysis points to 110 products available at 90% LTV or above, a number that increases by around 50 if you include shared ownership and guarantor deals. This is a far cry from the depths of the product slump when lending at these LTV levels was non-existent.
The majority of these products are being delivered by the smaller lenders, particularly the regional societies, who whilst constrained in terms of lending capacity, have (re-) entered the first time buyer market with a vengeance and do appear to be picking up the mantle of supporting first time buyers in their local communities – often innovating along the way. This is a really positive step forward, albeit in many cases deals will only be available within specific localities and criteria will inevitably by tough.
Turning to the new entrants, the last 12 months or so have seen a number of new entrants seeking to exploit the void of funding for first time buyers. The highest profile new entrant in this space is Aldermore, who was the first player to launch a 100% product since the crisis began – a brave move. While not cheap, the Family Guarantee Mortgage offers access to funding and also provides protection for the lender due to the parental security provided above 75%.
I understand Aldermore is also proposing a variant to the product, providing parents the opportunity to use savings as security for the loan, rather than taking a charge. This is a really welcome development that provides a great way to leverage the full capability of Aldermore, whilst also delivering greater flexibility for parents to support their off-spring. The concept of “family off-set”, is one that I hope will gain greater traction in the months ahead.
However, it’s not just the smaller societies and new entrants that justify a mention. Nationwide has also taken a leading role in the sector through the innovative Save to Buy product. While Nationwide’s recent change in the treatment of new build no longer being valued at second hand rates is also a helpful move. The recent move by Halifax to move their LTV up from 80% to 90% on new build is also a major policy shift, albeit distribution is relatively limited for selected brokers supporting Barratts, Persimmon and Taylor Wimpey.
But irrespective of whatever the new and smaller lenders are doing, leadership from these major players is critical to ensuring that there is sufficient scale of funding to support growing the first time buyer sector.
In conclusion, following a couple of years of virtual inactivity, there are positive signs of life in the first time buyer sector and amongst the lenders that support it. The new entrants, re-entrants and majors are all playing their part in driving availability and it’s pleasing to see most lenders standing behind these products over the last few days, when many other products were being pulled or significantly re-priced.
Is there enough innovation? Almost certainly not. But there are a raft of solutions available and the governments’ MIG scheme, when it launches, will increase options further. The challenge is ensuring that the funding available is fully utilised, which is heavily down to lenders and brokers working together to raise awareness amongst prospective first time buyers that they don’t necessarily need a 30% deposit to get on the ladder is a priority.
Paul Shearman is proposition director at Openwork
