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First-time buyers are defying the muted purchase market – Bamford

by: Patrick Bamford, head of international business development at Qualis Credit Risk, part of AmTrust International
  • 10/11/2023
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First-time buyers are defying the muted purchase market – Bamford
In a market where other types of purchase transactions have been falling, the importance of first-time buyer activity has grown and, according to a recent study, that will continue in the years ahead.

Research by the Centre for Economics and Business Research (Cebr), in partnership with Coventry for Intermediaries, recently revealed the value of the first-time buyer ‘economy’ will reach £74.1bn by 2025.  

That includes any spending by first-time buyers as a result of them buying a home, such as legal fees, homemoving costs, but also money spent in the wider economy on kitting out a new home.  

In terms of lending alone, it is anticipated this will hit £71bn in 2025, up from the estimated lending amount of £56.5bn this year, and up from the anticipated £65.3bn in 2024. 


Preferred conditions 

It’s been clear for some time that first-time buyers are taking up a sizeable share of all transactions. That has much to do with the type of properties they tend to buy and which are available, those which have seen falling prices, plus the availability of mortgage products specifically focused on this borrower demographic, which have been increasing since last year’s fateful mini Budget. 

There are still issues to overcome of course, not least saving for the necessary deposit, but also in a higher-rate environment, first-timers have higher affordability thresholds to meet, and that is not always an easy square to circle, especially when wage inflation has – for the most part – not kept up with house price inflation.  

That said, with rental payments often dwarfing what potential purchasers will pay should they be able to find a property. It is not beyond the means of a growing number of first-timers to be able to get the maths to work, and to be able to make their moves onto the ladder.  


The government’s stance 

At the same time, one wonders if we will hear of any future government support in this area, simply because it’s likely that housing issues will be a big factor in how younger people vote at the next General Election, which is likely to occur at some point in 2024.  

In a market in which first-timers are regularly accounting for over a third of all purchases each year, it would be surprising if we didn’t see the government at least looking into further schemes to support them onto the ladder.  

Help to Buy was not without its issues, but it was responsible for thousands of new homeowners getting into new-build homes, and there has certainly been a gap in the market since it ended. The considerable housing developer lobby will undoubtedly have been making its voice heard by HM Treasury and the Chancellor, and the rumour mill has suggested that a replacement for Help to Buy has been under consideration.  

However, while we await the Autumn Statement later this month to see if there is any further meat placed on this bone, the mortgage industry itself can continue to look at the ways in which it can support first-timers.  

Whether it be innovative product options such as the Skipton’s 100 per cent loan to value (LTV) product which take rental payments into account, or it is more traditional options such as a greater focus on high LTV mortgage lending, there should always be a growing number of routes to help first-timers to get into new homes. 


Appetite to lend 

Over the last few months, we have seen a greater number of high LTV products coming to market, after a significant drop towards the end of last year. It seems obvious that if this is one area of the purchase market that is thriving, then lenders are more likely to put further resource and funding behind it.  

The government recently announced it would be extending its Mortgage Guarantee Scheme in this area, however, my view is that enough taxpayers’ money has been spent on an expensive and inflexible option, and most lenders are using private alternatives anyway. 

Far better now for the government to put its considerable weight behind industry solutions in this area, which cost the taxpayer nothing, but would arguably deliver far better results for both lenders and the end consumer, who ultimately ends up paying for any guarantee/insurance. 

Overall, we have a strong opportunity here to ensure the next generation of homeowners can get into their first homes. For too long, this has been a mountain to climb, and while we are not suggesting this has become noticeably easier, there is much to suggest that with a continued focus in this area, the slog to the top can get easier. 

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