What’s more, a lack of supply in the housing market only adds to the pain being felt by first-time buyers. As a result, they are now required to save more towards a deposit, search longer and harder for their dream home and budget for higher running costs, making it an even greater challenge to take that first step onto the property ladder.
Against this backdrop, first-time buyers still hold an important place in the market with specialist lenders and building societies determined to support them through a combination of innovation and common-sense led approaches.
Innovative solutions
Research has shown that during 2021, 56 per cent of first-time buyers received family support, without which they wouldn’t have been able to have purchased their property. This is not a new theme in the market, and over the past few years, a number of lenders have introduced no deposit mortgage options, such as the Tipton’s Family Assist product.
This type of product enables borrowers to purchase a property with little or no deposit.
With family assisted type mortgages, the borrower must still be able to pass affordability checks in their own names. However, there is still the option for joint borrower sole proprietor (JBSP) mortgages, where a family member can be party to the mortgage for affordability assessments when they are not planning on living at the property.
Alternatively, where a family member isn’t in a position to support, new private equity loan providers are coming to market with the aim to aid borrowers in raising or boosting their deposit.
Examples include Proportunity, Ahauz and Even which are equity loan providers showing real innovation in the market to help first-time buyers.
Typically, they allow borrowers to gain mortgage finance with a smaller cash deposit but avoid high loan to value (LTV) interest rates. Borrowers are required to deposit a minimum of five, with up to a further 15 per cent being provided by the equity loan providers. This qualifies borrowers for an 80 per cent LTV product, typically with lower rates than a standard 95 per cent LTV product would offer.
Manual underwriting
Many regional building societies still offer manual underwriting, which is a key component to helping and understanding the particular circumstances of first-time buyers. This approach allows underwriters to look at the bigger picture and get a balanced view on a client’s ability to repay the mortgage they are applying for.
Rather than automated computer decisions based on credit scores, manual underwriters can individually assess a borrower’s credit history to understand how best to support them.
This common sense-based approach can be particularly helpful for first-time buyers who may not have built a high credit score, due to lack of credit.
With increasing product innovation now available in the first-time buyer market, it feels even more of an opportunity for building societies and specialist lenders to continue to focus and share what they can do in this space, which ultimately results in the fantastic outcome of someone owning their first home.
