Yet, as I’m sure we all recognise, the average age of first-time buyers has been going up for some time. It may now be in the mid-30s, but some research from mortgage lender Tembo reveals there are large numbers who are not so fortunate and are having to wait much longer.
The number of first-time buyers in their 20s is in decline, while the number of those aged over 40 continues to increase and, perhaps somewhat shockingly, the number of those who are over 50 has increased by 30 per cent over the past five years.
And, of course, there will be a large cohort of people who no doubt feel the chances of them ever getting on the ladder are slim to none, never mind having a first mortgage at an age at which, traditionally, many people were paying theirs off.
Ageing out of mainstream mortgages
It feels bizarre to be saying this, due to the fact we are referring to first-time buyers, but this is effectively ‘later life lending’ because of the mortgage term and where it takes these borrowers.
It is perhaps unsurprising, therefore, that there is growing noise around the ‘merging’ of mainstream mortgage options that segue way into more specialist later life residential lending.
After all, if you are unable to get on the housing ladder until you are 50-plus years of age, a 25-year mortgage term takes you well into your 70s, and well past what is – right now – the traditional state pension age.
Of course, you might still be working in a full-time job at that point, but lenders in particular have to anticipate that the first-time buyer may not be. That buyer may potentially be on a fixed pension income of some sort, which could impact their ability to afford that mortgage at that older age.
I wonder as well if advisers will now need to focus more on this potential blurring of the mortgage lines.
Indeed, the client doesn’t need to be in their 50s and buying a first home; those in their 40s will have similar issues, while those in their 20s and 30s are already having to take out mortgages with longer terms, which again might not be finished until they are well into ‘retirement’.
All parts working together
The phrase ‘a mortgage for life’ seems particularly relevant, therefore, and one can’t help but feel advisers in future are going to need to be just as au fait with later life lending options as they are with traditional, mainstream ones. Perhaps we have already reached that point, because affordability and underwriting will be predicated on the ‘end age’ of that borrower when they take out that first (or any) future mortgage.
Again, it is no wonder that we are seeing a hybrid approach to borrowing becoming more widespread and accepted – mainstream mortgages morphing into residential interest-only or lifetime mortgages, allowing the borrower to keep paying off the loan (or the interest) and still being able to stay in that home for as long as they wish.
I appreciate it seems odd to be even talking about equity release in relation to first-time buyers, but these first-time buyer age figures are going to necessitate such conversations. Perhaps this will be the major growth market for advisers for the future, especially given the amount of equity tied up in property, a lack of pension provision and all the extra financial responsibilities that most people have later in life.
With all of this, it is perhaps no wonder that – prior to next month’s Budget – we have heard a lot from various sources about both further support for first-time buyers and, indeed, a rumour of widespread stamp duty changes for those in later life who feel they can’t sell or downsize because of the cost of moving, including a large sum for this tax.
A holistic approach to mortgages
As always, the interconnectedness of the mortgage market always has to be considered. Maybe that has been a failure of our policymakers over the last two decades in terms of not recognising how, when one area is impacted, so are multiple others.
There has never been a more important time to look at the mortgage and property markets as a whole and to act on that basis. The days of silos appear to be over, and the sooner we have solutions which recognise this, the better.
