Borrowers have to save longer for deposits, intermediaries have to undertake more paperwork than ever before and lenders are operating under stricter regulatory constraints.
This isn’t a criticism. It’s simply how the market has evolved post-credit crunch. And it’s certainly not all doom and gloom, especially for borrowers, although – on first impressions at least – this may not appear so evident.
Challenging journey
When it comes to raising funds for a property purchase, for many there is still a challenging journey.
It takes an average single buyer nearly 12 years to save a 15% deposit for their first home – which is a whole year longer than at the end of 2015 – but it’s not all bad news.
Lenders are increasingly offering higher loan-to-value (LTV) mortgages and the rates charged on those have fallen more than across any other mortgage type.
Taking advantage of Help to Buy schemes or taking out a 90% mortgage means that for buyers with a high enough income the time to save a deposit could fall substantially.
In Q4 2016 it would take an average single first-time buyer 11 years and nine months to save a 15% deposit.
However, by reducing the deposit to 10% this cuts three and a half years off the saving time – equating to a total of eight years and three months.
And when cutting this saving to a 5% deposit, this reduces the overall saving time by a massive seven years – meaning that this total can be reached after just four years of saving up.
Regional differences
There do remain regional variations though.
For a single buyer in London it still takes 18 years and 3 months to save up for a 15% deposit – that’s six and a half years more than the UK average.
The South East and the South West are the second and third areas where it takes the longest time to save for a deposit – 15 years and three months and 14 years and six months respectively.
But with interest rates set to remain low for the foreseeable future, borrowing should remain cheap and that’s good news for first-time-buyers.
This data, taken from Hamptons International’s Time to Save research, outlines how important it is to keep track of market trends and evaluate exactly how these shifts translate into time, money and value for potential purchasers.
Lenders now have a stronger base, in terms of funding, risk and overall market conditions, from which to offer higher loan to value mortgages which is obviously great news for first-time-buyers.
Higher LTVs
The proportion of loans made at 90% grew to 5% in 2016, up from 3.8% in 2015. This increasing availability of higher LTV lending, combined with lower mortgage rates, has improved the purchasing power for more first time-buyers.
As it stands a growing number of options are opening-up for first-time buyers.
While still keen to swell their books, mortgage lenders may become more cautious about the risks as household incomes are squeezed.
Nevertheless, existing affordability stress tests are stringent enough to mean that this should make little difference to the availability of lending.
