At first glance the first time buyer market may seem like a lot of work for little return. It means dealing with clients who need a tremendous amount of hand-holding. As we all know, house buying for first timers can be an emotional as well as financial minefield. What is more, most first time buyers have too little spare cash to even contemplate buying other financial products.
There are many reasons to bother making an effort. But first it is important to look at the market and at first time buyers themselves in more detail.
The housing market is more stable now than it has been for years. Most analysts agree that although house prices are rising steadily, at around 7% a year, because inflation is remaining low, a return to the alarming boom and bust cycle of the 1980s seems most unlikely. This sets a favourable stage for first time buyers ‘ more reasonable house prices and less likelihood of falling into the negative equity trap that caught so many first timers out in the boom and bust years.
Figures also show first time buyers are growing up, making them a more attractive prospect for financial advisers. More buyers are waiting to enter the housing market rather than rushing in with little or no money behind them. Many believe this is a direct result of young people suffering debt hangovers from higher education making them keen to clear their debts and build up a small nest egg to avoid the risk of losing money on their first house purchase. The upshot of this is that the typical age of first time buyers has risen from 24 to 27, while the size of their deposits has also risen.
Another important point is that the first time buyer market is booming. Research conducted by the National Association of Estate Agents (NAEA) shows that first time buyers account for more than one quarter of all house sales in the country.
So what does a first time buyer look like? The first time buyer profile of one major lender shows them as aged between 25 to 44, married or living with a partner, usually a couple with young children and with an income anywhere between £9,500 and £35,000 a year.
So are first time buyers really worth the effort? The short answer is yes. They are an excellent source of future business for four main reasons.
First, they obviously have no existing mortgage protection in place as they are looking to take out their first mortgage.
Second, they have reached a stage of life when they are ready to look at their overall finances, probably for the first time ‘ an excellent time to offer them a financial review.
Third, experience has shown that if advisers step in at this emotionally-charged time, they are likely to keep a client for a long time. Finally, first time buyers are an excellent source of referral work and tend to pass their adviser’s name on to other first time buyers.
Bucking the trend
So what do advisers have to do to attract first time buyers to their door? Typically, first time buyers will go direct to mortgage lenders for advice on buying a home. So advisers need to use marketing techniques to buck this trend.
There are a number of marketing ideas that can demonstrate just how much opportunity there is out there. But there is one element that is key ‘ advertising. Advertising works, but it only works if, first, a message is identified and second, a lot of thought is put into where the advert is placed.
For example, in an area where property prices are particularly high, first time buyers may be looking to maximise their buying power. To this end it would be a good idea for advisers to advertise the fact they can give clients higher income multiples. Alternatively, it may be the speed and quality of the service which is offered that is key ‘ especially in the complex and mesmerising world of first time mortgage deals. On looking around, it may become apparent it is the low or no deposit angle that is worth pushing. But above all, it is important that advertising is clear, concise and punchy.
Next, it is important to decide where to display advertising. The property section of a local newspaper is an obvious choice, and it may be that some local papers run a first time buyer page. It is definitely worth taking some time to think more laterally about where to place advertising. For example, young people tend to work out, so advertising in local gyms and leisure centres, or football club programmes may be effective.
Young people who want to buy their first home are often likely to be getting married soon. What about placing adverts in wedding magazines or the lifestyle section of local magazines and papers? Advertising does work, but one-off advertising will have little effect. Advertising runs of three to four weeks in weekly publications are likely to produce the best results.
Another consideration to attract first time buyer business is to run a seminar on the subject. First time buyer seminars can be extremely successful. It is important to remember that first time buyers are relatively green about the mortgage market and are desperate to learn more. An evening seminar in a suitable venue, a local hotel, for example, will be worth its weight in gold. It will take time to organise ‘ the venue, some refreshments, writing the seminar itself ‘ but it can be a great way to get the message across.
A third method is to trawl through an existing client list to find people who fit the first time buyer profile. Advisers may be able to top up the list with the children of existing clients who may well be thinking about buying their first home. When a list is compiled, the next step is to write a short, personal letter informing clients about the first time buyer service. A targeted, personalised mailshot like this should bring in some business.
Another idea is going to a local wedding fair or home exhibition ‘ the kind of places where first time buyers are likely to be found. It is a good idea to ask to put up posters and distribute leaflets there.
The final two marketing ideas involve teaming up with local businesses: builders of starter homes and estate agents. It is best to concentrate on smaller businesses here as the larger companies usually offer their own financial advice. But smaller builders and agencies may be very interested in joining forces with an adviser to offer a more comprehensive service to their clients.
There are, however, pitfalls to watch out for. First, first time buyers do need a lot of hand holding. Most will know nothing about the process of buying a home. At the same time their need for good, sound advice means there is a real market to tap into. It simply is not enough to look at the rates and deals on offer. First time buyers need someone to lean on throughout the whole process.
Second, money is often tight for first time buyers ‘ cross-selling opportunities will come later so it is important for advisers to bide their time.
There are a number of organisations which offer advisers more detailed advice on advertising and marketing. There are workshops on how to run a marketing campaign and how to conduct a seminar, plus examples of typical adverts that can be run as a mailshot letter. It is definitely worth doing some research into this area, before taking the plunge.
The mortgage industry is awash with first time buyer deals and offers. And the situation is changing on a daily basis. What first time buyers want more than anything is clear, simple and easy to understand advice. They want the best deal, and they want to find the best deal without too much hassle and heartache. Advisers can offer first time buyers all this and much more. It is simply a question of planning a campaign and getting out there.