Will first-time buyers’ share of the mortgage market be higher or lower than 24% by the end of the year?
Examining the issue in this week’s Market Watch are:
Alison Beech, business relationship director, Spicerhaart
Hugh Wade-Jones, director, Enness Private Clients
Eric Stoclet, CEO, Crown Mortgage Management
Alison Beech, business relationship director, Spicerhaart
We saw a significant 8% surge on the previous month in the number of mortgage applications from first-time buyers, ahead of the end of Stamp Duty relief on properties below £250,000.
First-time buyer applications have unsurprisingly dropped back from that spike since then, but we’re confident that there will still be plenty of first-time buyers able to buy homes in 2012. Clearly lenders could always do more, but we recognise their constraints.
First-time buyer demand continues to outstrip the supply of mortgages available, which allows lenders to be selective about the risks they want on their books. We expect NewBuy to gain some traction and, whilst the early signs haven’t been very encouraging, it’s a positive move and will help.
Our view is that the market share of first-time buyers will be broadly flat. A modest increase will be possible if the NewBuy scheme gains traction. Those that can afford to buy and, crucially, have access to the required deposit, will buy.
Because of our estate agency based market activity, our own market share of FTB’s tends to be reasonably constant, at around 35% to 38% of our mortgage volumes, no matter how challenging the wider market-place.
Hugh Wade-Jones, director, Enness Private Clients
With the Stamp Duty holiday now over, I would be extremely surprised if the percentage of first-time buyers did anything but fall surely and steadily over the remainder of the year.
The sad truth is that as credit tightening continues, the banks will shy away from riskier, higher Loan to Value (LTV) lending and favour more straightforward vanilla borrowers. This will only widen the gap further at the top and the bottom of the housing market.
Lenders are not solely to blame for this happening, as the global economic crisis means many of them are fighting for their very existence or at least struggling to retain what position they do have, so their lending policy must mirror this.
The Government needs to be doing more to encourage first-time buyers into the market, be it through a state-backed mortgage indemnity guarantee scheme, reinstatement of the Stamp Duty holiday it so inexcusably withdrew at the last Budget, or a more vast-reaching relaxation of planning laws.
First-time buyers have long been regarded as the lifeblood of the industry and without a steady influx of new borrowers the whole market is at risk of stalemate.
Eric Stoclet, CEO, Crown Mortgage Management
There are many reasons to believe that overall mortgage growth in the UK will be tame at best: a double dip recession, chaos in the Eurozone, lack of wholesale funding for banks, high unemployment, low wage growth, and inflation which by far outpaces wage growth.
Somewhat counter intuitively however, the average price for a home in the UK, which stands at £173,202, and the low interest rate environment put housing at its most affordable in a decade, according to Lloyds TSB’s Affordable Cities Review.
Nonetheless, the squeeze on wages experienced over the past four years by most people means that saving enough to make even a modest down payment on that dream house has become the stuff of nightmares.
At 30, the age of an average first-time buyer, today’s prospective homeowner will have just gone through four years of decreasing living standards at a time he or she was building a family.
Earnings from wages earned during the years before one turns 26, during which most of us start a family, are not usually enough to set aside sufficient funds for a down payment on housing. It is highly likely therefore that first-time buyers’ share of the mortgage market will drop from today’s levels unless help in some form is made available.
