Better Business
We won’t repeat recent market performance without first-time buyer attention – Bamford
Guest Author:
Patrick Bamford, head of international business development at Qualis Credit Risk, part of AmTrust InternationalUK Finance recently revealed its final 2022 figures. They make for interesting reading on what has passed, as well as shining a light on what the expectations might be for the remainder of 2023 as a whole.
‘Subdued growth’ is not a phrase that rings with total positivity, but that’s how the trade body described what the mortgage market achieved in 2022.
Perhaps the two-word assessment is also the mirror image of last year – growth in the first half, and subdued in the second? That’s certainly the way it felt, and perhaps the figures for the year as a whole reflect that.
On the surface, it looks fairly positive, and much more in keeping with a ‘normal’ pre-pandemic market. For instance, when it comes to the number of first-time buyer loans during the year, the figure of 370,000 looks pretty healthy.
Of course, it was never likely to reach the numbers achieved in 2021 – 405,000 – because of a combination of activity drivers, notably the stamp duty holiday. However, in comparison with the last pre-pandemic ‘normal’ year – 2019 when it the loan numbers were 351,000, it still looks positive.
And it was always likely to be well above what the lockdown-hit market of 2020 was able to achieve – 304,000.
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Back to reality
However, as we know, putting our reality check hats on, it will be apparent to everyone what happened to the market post-mini Budget, and how the full impact of this was felt back at the tail-end of 2022, and is still going to be felt well into 2023.
Notably, and perhaps most fundamentally, the new interest rate environment we have puts a real spanner in the works for many would-be first-time buyers because of the far greater affordability obstacle this provides.
Add to this, rising rents in the private rental sector, which make it even more difficult to save for a deposit, and a distinct lack of affordable homes to buy, and stock in general for purchase, and you might understand why first-time buyers are getting older. The loans they are taking out are longer too, and as UK Finance points out, the average first-time buyer would be well into their 70s by the time they paid their initial loan off, if they did not redeem it beforehand.
And with the end of Help to Buy, you can understand why there is a concerted effort being made to focus on bringing more affordable property to market, to ensure we maintain and increase the level of high loan to value (LTV) mortgages.
As an industry we continue to support private alternatives to the government’s Guarantee Scheme and to Help to Buy such as Deposit Unlock.
But, as a fundamental here, it’s apparent that without increased levels of affordable home supply, coupled with greater levels of high LTV product choice, there will continue to be a disconnect between those who harbour a wish to buy a first home and those who are able to actually make this happen.
Until we tackle these somewhat split foundations, we can’t really build anything beyond what is being achieved right now, and you might justifiably argue that first-time buyer loans are more likely to go down rather than up in the short term, unless we truly do get a handle on what is required.