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Lenders are almost giving-up on first-time buyers without family support – Bamford

by: Pad Bamford, business development director at AmTrust Mortgage & Credit
  • 21/12/2018
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Lenders are almost giving-up on first-time buyers without family support – Bamford
Reliance on family wealth to bridge the gap between renting or living at home and first-time buyers owning their own property appears to be all-encompassing.


This is to such an extent research from The Resolution Foundation suggests it’s “almost impossible” for those who cannot rely on their parents’ largesse to get a foothold on the ladder.

That is a shocking suggestion and does more damage to the notion of, for example, social mobility than we might possibly have thought.

With the supply of quality private rental homes also falling back, not being able to provide young people with the opportunity to own their own home shows we have a dysfunctional market.

Resolution Foundation’s research revealed those younger potential purchasers who have parents with property wealth are three times more likely to own their first home by the age of 30, compared to those whose parents aren’t in such a position.

And this is an issue which is not going away anytime soon – it’s getting worse.


Lenders almost giving up

Looking back to the mid-1990s and early-2000s, those whose parents had property wealth were twice as likely to own a home by 30 – so you can see that gap is growing and growing.

This trend will continue at a pace, especially as we appear to be developing a lending culture for first-time buyers which is predominantly family support-focused.

Indeed, the report by the Building Societies Association on this subject could be seen as a sign that the lending market is almost giving up on those not in such a fortunate position.

An increasingly risk-averse lending community appears to be putting all its first-time buyer eggs in the bank of mum and dad basket.

Products are growing for those fortunate enough to have that parental support while there is a disinclination to offer lending for those who cannot use that well for their deposit and/or guarantees.


Parent support and high LTVs

Yes, we’ve seen a growth in high loan to value (LTV) product options, but does this truly translate to a growth in lending to those borrowers who don’t have parental support.

At present, it appears to be that first-timers need both parental intervention and high LTV loans to purchase their first property.

Even then they will be paying significantly more for their mortgage every month, compared to those who can afford a much larger deposit.

As mentioned, you would expect any housing gap here to be filled by the private rental sector, but this is being squeezed by government and regulatory intervention, with supply falling and rents rising.

That makes it even more difficult for those who cannot rely on their parents to save for a deposit, simply because large amounts of their income is going to fund existing housing costs.


Joined-up thinking

The first-time buyer ‘haves’ and ‘have nots’ are now as far apart as perhaps they’ve ever been.

It is perhaps no wonder that many are calling for a return to 100% LTV mortgages, although regulators might baulk at this.

What we first need to do is deliver some joined-up thinking in the housing and mortgage market and, dare I say it, have a cross-party approach to it.

This is now far too important – and the divide far too large – to operate short-term, stop-gap measures which end up doing more harm than good.

If we don’t change, then the first-time buyer lifeblood of our market will soon be down to a trickle.


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