According to IMLA’s latest survey, 58% of first-time buyers were unable to get a mortgage through their broker in the final three months of 2008, and 56% of brokers questioned said the reason that they couldn’t secure a deal for a first-time buyer was that the best products were only available direct. None of this will be news to you. With HSBC and subsidiary First Direct targeting first-timers, intermediaries are pretty comprehensively stuffed.
However, all that might be about to change. There are indications that Northern Rock is preparing to come back into the market (see page 2). We know that the Government (which owns it) wants the Rock to lend more, and has pushed back its loan repayment deadlines to allow that. And apparently, the bank has been hiring more ‘specialist mortgage staff’ – presumably rehiring many of those it has made redundant in the last year. If it does start lending to first-time buyers, others may well follow.
But first-time buyer numbers are at an all-time low, and may not necessarily recover soon. The National Association of Estate Agents tells us that it sees a revival of interest in the housing market, with a substantial increase in the number of buyers registering with agents – but it also says that most of those are people who already own property.
Prospective first-timers appear to be going off the idea of homeownership altogether. It may not be statistically significant, but the chief executive of a large conveyancing firm recently told our chairman that his own university-aged children had expressed a positive aversion to owning property. Too expensive, too much hassle, too risky, apparently.
And of course for the moment, those who might consider getting on the ladder are put off by the rates available. Sitting on the panel of Radio 4’s MoneyBox Live last week, I was struck by just how rate-sensitive people are at the moment. Of course, borrowers have always bought on rate, but everyone now seems to think they should be paying Bank Base Rate or thereabouts, and the fact that such rates are simply not available could well be contributing to the market downturn.
I took a question from a first-time buyer looking to buy jointly with his partner. Both had good jobs, could easily support a large mortgage and had a 15% deposit to put down. He was also convinced that now is a good time to strike a bargain. But he was absolutely outraged at the possibility of having to pay around 5% for a deal. I wonder how many intermediaries have found themselves trying to point out to prospective first-time buyers that a rate of around 5% is not that bad?
An even more extreme example was another caller with a £150,000 mortgage on a 5.09% fixed rate with First Direct. It runs out at the end of April and her rate will revert to the SVR of 3.69%. She has just lost her £70,000 a year job, and her partner only earns £18,000. She had spoken to First Direct, who are ‘probably’ going to allow her to take a payment holiday. But she wanted to know whether she could switch the deal in order to get a better rate than 3.69%, which she thinks is abit high.
A case of champagne goes to the intermediary who can place that case…
