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Product innovation: An improving outlook for borrowers – IMLA

by: Peter Williams, executive director of IMLA
  • 14/06/2016
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Product innovation: An improving outlook for borrowers – IMLA
Different borrower profiles face different challenges when it comes to obtaining a mortgage, but thanks to lenders’ product innovation the outlook is improving for two demographics at opposite ends of the age spectrum.

First-time buyers’ struggles with rising house prices have been widely publicised and many continue to struggle to raise large deposits, especially in areas with high rents. High loan-to-value (LTV) products have a huge role to play in supporting homeownership, and improving options in this area – including the much-heralded return of 100% mortgages, albeit with a 10% guarantor deposit – should be warmly welcomed.

Given that any consumer has to pass a post-Mortgage Market Review (MMR) affordability check to qualify, lingering fears of small deposit loans are overstated. The high LTV mortgage market has been heavily endorsed by government for the last three years through Help to Buy mortgage guarantee scheme and it is vital it continues even when the guarantee scheme ends in December 2016.

At the other end of the scale, the outlook for older borrowers is also showing signs of improving. The UK’s changing demographic profile means households will need to borrow for longer, and lenders – large and small – stand alongside trade bodies and the regulator in stepping up to the challenge, both by reviewing age criteria for existing products and exploring new offerings. Britain’s elderly population is growing, and it is important that the market can meet their needs. As the recent FCA discussion paper on access to financial services makes clear, there is more work to be done but it is clear lenders are responding to this market need.

Both these initiatives are vital to ensure the UK has a fully functioning and inclusive mortgage market, given continued house price inflation and squeezed savings. Regulators and government are part of this and should continue to support lenders’ willingness to explore ways to reach out to diverse borrowers.

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