Staying on the data trail, AmTrust’s latest quarterly mortgage loan to value (LTV) tracker found that the cost of mortgages has fallen for first-time buyers at both 75 per cent and 95 per cent LTV levels.
The rate differential between 75 per cent and 95 per cent LTV loans has also continued to narrow, down to 1.49 per cent from 1.86 per cent in Q3 and 2.21 per cent in Q2 last year.
In addition, Mortgage Brain’s latest product data analysis outlined a significant drop in fixed rate mortgage costs in the last 12 months.
The cost of a two-year fix with a 90 per cent LTV was suggested to be eight per cent lower when compared to the same time last year.
And five- and three-year fixed rates with a 90 per cent LTV cost two per cent less than they did at the beginning of January 2018.
We have established that a greater number of first-time buyers (FTBs) are entering the market and that available rates sit at highly competitive levels across a variety of LTV bands, meaning it’s all sweetness and light, isn’t it?
Worrying trend
Not quite.
A warning shot emerged after the FCA found that 40 per cent of borrowers who took out a mortgage in 2017 will be aged over 65 when their mortgage matures – leaving them potentially unable to save for a pension, and vulnerable to any financial shocks.
This figure represents a huge shift over the last five years. As recently as 2012, only a fifth of mortgages were expected to run into the borrower’s retirement.
This trend is worrying, but it’s important we maintain a realistic overview of this important sector. Homeownership aspirations remain intact and opportunities will continue to emerge for proactive intermediaries.
Five action points
So, what more can you be doing to tap into this market and better service FTBs’ needs? Here are five key action points to build on:
- When attracting and engaging with FTBs, intermediaries need to consider all mediums of communication and technology. You may not be a social media expert but at least be aware of its potential benefits and pitfalls. And ways in which you can help process cases digitally, not to mention how you engage with FTBs throughout the application and completion process
- Strong referral levels are the holy grail for any business. Making sure that all clients are fully satisfied is a key factor in unlocking potential future growth, and this starts with FTBs
- Your existing client bank is a goldmine of potential new clients, think of older clients who may have children reaching homebuying ages. Consider how inter-generational lending could be a part of the conversation and make sure you are well-versed on these types of offerings
- In a similar vein, being on top of government initiatives such as Help to Buy equity loans, Help to Buy ISAs and shared ownership schemes – not to mention the intricacies attached to new build – can prove vital in finding suitable solutions for a variety of FTB’s
- There are also many product-related incentives on offer and, inevitably, there will be ones which are more appropriate for individual clients than others
There is nothing ground-breaking here, but it never hurts to revisit, review and refresh some key elements within the advice process, especially when focusing on a market which moves so quickly.
