Take, for instance, the Council of Mortgage Lender’s figures for the middle two quarters of this year and we can see an increase in loan numbers from 76,500 in quarter two to 86,800 in quarter three. Similarly, as you might expect with such an increase in activity, the value of those loans was up sizeably over the same period from £11.3bn to £13.2bn.
These figures appear to indicate that the first-time buyer market continues to develop in the right direction. However, let’s delve a little further into these figures and compare them on an annual basis. Back in the third quarter of 2014 82,100 loans were taken out by first-time buyers, amounting to £12.2bn, so we are not too far away from the market of 12 months previously.
The average loan-to-value for first-time buyers stood at 83.7% in the third quarter of this year and in the same quarter in 2014 it was 83.9%. This appears to evidence the notion that first-time buyers’ main concern will still be the amount of deposit required to secure a property, and that without doubt the most competitive rates are reserved for those who are able to put more money down.
It also suggests that, even with the introduction of Help to Buy, we are not particularly close to developing a market where first-timers can support their home-owning ambitions with a much lower deposit requirement. Average first-timers are putting down deposits of around 16%, which given average UK house prices, is likely to mean a £20,000-plus saving requirement.
Product choice in the high LTV space has grown, with Help to Buy being a catalyst, but recent evidence suggests the appetite to lend in this part of the market is falling back somewhat. There are particular lenders, mainly building societies, who have always been committed to the high-LTV market and will remain so. But what about those whose interest was piqued by Help to Buy 2 and are likely to be less enthused when this part of the scheme finishes?
First-timers will undoubtedly welcome the Chancellor’s Autumn Statement in which he showed himself to be firmly on their side and willing to help them to compete with buy-to-let landlords in order to secure a property. However, the finance also has to be available to make these various first-time buyer schemes work.
Joined-up thinking is undoubtedly required to make the dreams of many thousands of first-timers a reality, and at the heart of this has to be an understanding that low-deposit mortgage products need to be in plentiful supply, competitive and affordable. If we as private insurers, the government and lenders can square this circle then we are going a long way towards helping many more potential buyers get that all-important first foot on the ladder.