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We need to cater to complexities to maximise first-time buyer resurgence – Hendry

by: Grant Hendry, director of sales at Foundation Home Loans
  • 19/06/2023
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We need to cater to complexities to maximise first-time buyer resurgence – Hendry
For those individuals who, up until now, have only dreamed of extricating themselves from the rental market or indeed their parental home to get on the property ladder, there appears to be a growing amount of evidence to suggest the tide might be (slowly) turning in their favour.

Of course, there are a whole array of facets and obstacles to overcome before purchasing a first property. Last year, first-timers were the biggest purchasing demographic and it looks as if 2023 might produce the same result. 

According to the most recent Hampton’s Market Insight report, entitled ‘Return of Commuterville’, the share of homes being bought by first-time buyers continues to rise year-on-year. In 2023, it is already up to 27 per cent, an improvement on last year, and according to the agency’s statistics, there has been a steady rise in numbers for the best part of a decade. 

That said, first-timers were certainly not done any favours by last year’s mini Budget – or the more recent rate shifts – and the rise in mortgage pricing has needed to be factored into any plans, particularly around affordability and the type of properties first-timers are now more likely to be purchasing. 

Hamptons says figures in 2023 show that, for the first time in over a decade, first-time buyers are opting to purchase smaller homes in more affordable locations, with one/two-bedroom homes being favoured over larger properties. 

It is for this reason, that it expects prices for flats in more local authorities in the UK to rise faster than that of houses. This year, there are seven such authorities – mostly in London – where this is already the case. 

Clearly, there has been a lot of focus on the options for first-time buyers in recent weeks and a specific focus on those currently renting who would be able to afford a mortgage but are not in a position to put down the deposit required. 

  

Awareness of complexities 

For the vast majority of first-timers, that ‘skin in the game’ element is still very important – which is why in recent years we’ve seen the Bank of Mum and Dad (BOMAD) so heavily in demand. Given product pricing, I think we can all accept that the influence of BOMAD is not going to wane any time soon. 

What advisers, and their prospective first-time buyer clients, will also continue to need is product options that make the most of the income they have, and the much more complex income streams that large numbers of people have nowadays. 

As we’ve seen, it’s one thing to have a deposit to put down, but it’s another to be able to secure a mortgage – particularly from the mainstream – if you have unusual sources of income, or multiple incomes, or if you’re newly self-employed, or are currently on a low starting salary but in a ‘professional’ career that will see significant increases in income in the future. 

 All of these need to be catered for, because increasingly we have people who do not just have one employer, one source of income, or are taxed at source by the employer. And these individuals are just as creditworthy as many in the above position, but history tells us that getting a mainstream mortgage when you’re perceived to be outside the ‘norm’ is not always easy. 

  

Catering to borrower needs 

It’s why we have a specialist residential sector, and lenders like ourselves, who cater to these types of first-time buyers and the differing working circumstances they have or the different ways they earn, with criteria and products that work for them.   

And, if it is the case that this housing market has become a much more benign one for some potential first-timers – and where they may well have an advantage right now – then it’s vitally important we get them the mortgages they require so they can (literally) make their move. 

We have talked a lot in recent years about the absolute necessity to get new blood onto the ladder.  

If we’re currently at the point where it’s achievable for more people, then we all have a duty to make sure we are delivering the advice and the mortgages they need to make the most of this situation. It may not last forever. 

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