Of course, more generic topics such as house prices, the Bank of England base rate, inflation and the like are always likely to garner significant coverage of this sort, but mortgage product-specific news doesn’t often have that ‘drop the dead donkey’ cache.
However, just recently, this certainly happened with Yorkshire Building Society’s announcement of its 99% loan to value (LTV) mortgage. Hats off to it for that, not just in terms of its ability to grab the headlines, but also in terms of the concept itself; the focus on a deposit ‘sweet spot’ for first-time buyers of £5,000, the appetite to lend up to 99%, and indeed the recognition in the first place that this type of product reflects consumer demand.
There was some talk, prior to the Budget, that the government would introduce its own scheme, however it never came to fruition, and while that scheme apparently faltered as not enough lenders were willing to lend in this space, it’s positive to see one that has been willing to do just that.
I’ve seen some comments from advisers focused on what the product won’t do, and that of course is part of their job, but even if it might only be appropriate for a small cohort of first-time buyers, what it is also likely to do is warm the waters of that market, and potentially tempt in some individuals who might have been disappointed in the past, or who might not believe they have everything lenders require in order to get into a first property.
More creative thinking from mortgage lenders
In that sense, our message to lenders has to be ‘more, please’, because, as mentioned, even if the levels of business on this 99% LTV mortgage might be relatively small, there will be other potential options available to borrowers.
The important point here is to get to see them in the first place to ascertain whether their finances can access such products.
There’s no doubt of course that purchases right across the board have suffered in a higher interest rate environment. 2023 was fairly flat in terms of purchase activity – even if first-timer buyers were more likely than others to be buying a property.
A combination of lower rates and such products as highlighted above, and of course mortgages such as Skipton’s Track Record launched last year, are seeking to entice potential first-time buyers back. More competitive rates will also allow second and third steppers to feel more confident about moving, while also being able to meet affordability measures.
Ride the wave of the returning purchase market
Our own statistics show a significant move back to a more ‘normal’ purchase and remortgage balance. Whereas, at times last year, most brokers including ours saw the business mix split 20-25% purchase compared to 75-80% remortgage, we’re now seeing purchase business safely past the 30% mark, and that is important for several reasons.
As we know, purchase mortgage procuration fees are typically higher than those paid for product transfer business – which has dominated the refinance space, certainly over the last 12-18 months – and of course, purchasers often have wider advice needs, which can result in a much deeper and beneficial relationship between adviser and client, with the obvious mutual benefits.
And our projection for purchase business for the rest of this and into next year focuses on a further increase. We assume we’re going to see a 40/60 purchase/remortgage business split as we progress through 2024 into 2025, and we suspect a considerable amount of this will come from new blood looking to get onto the ladder, which will certainly be boosted if more lenders are willing and able to follow the lead of Accord, Skipton and others.
Lender product innovation should always be welcomed by the broker market.
Overall, even if these products are mere sprats to catch a mackerel, they are still worth adding them to your ‘fishing line’ and, importantly, informing all potential first-time buyers of the availability of products like this. It’s highly likely that potential borrowers will already be aware of these greater numbers of options, but will need to know who they should be dealing with to have the best chance of accessing this lending, or finding a suitable, or indeed better, alternative.
Piggybacking on headline news is a well-used and effective PR and marketing tactic. Advisory firms should always be on the lookout for opportunities to do this.
