The fact that more first-timers are getting on the property ladder is clearly to be welcomed and whilst I’m as keen as the next person to read good news, I am somewhat surprised at some of the accompanied comments that have addressed this data.
One commentator was quoted as saying that 95% mortgages were ‘back’ and readily available with a price war taking place at this level. That all sounds like fantastic news however, as much as I wish otherwise, I doubt very much if potential first-timers will feel quite the same.
The reason is that, while we may have seen a slight increase in 95% and 90% products, there are large caveats attached to securing them – whether that be the requirement to access the Bank of Mum and Dad, secure some kind of guarantor, or simply meet the strict criteria set by most lenders in this sector of the market.
The simple fact, as the CML outlines in its latest RMS, is that the average LTV of mortgages taken out by those 21,700 first-timers was actually 80%. A healthy deposit in anyone’s book and a long way from 90/95%. Lenders who are offering, what I would call, simple 95% LTV products, are still few and far between.
For example, there are 95% deals available for the NewBuy scheme but again these come with their own restrictions and will only be suitable for a small niche.
Of course, the debate around the availability of higher LTV mortgages is not one consigned to the first-time buyer market; it is also a concern for the so-called second steppers who bought 2/3 years ago and are finding themselves unable to access the finance they need to move on.
But the market is certainly moving in the right direction and opening up, but this is a slow process and there is a focus on keeping the mortgages as risk-free as possible; for example, Barclays’ recently launched Family Springboard mortgage, which requires a family member to deposit 10% of the purchase price in a savings account.
What I would hope to see over the course of the next 12 months is a move amongst lenders to deliver 90/95% products without, as someone recently described it, ‘bells on’.
Until then, I suspect that news of a resurgent first-time buyers market will be premature and while we will continue to see more ‘95% mortgages’ offered they will require a wealthy parent or guarantor to actually make them a reality.
Bob Hunt is chief executive of Paradigm Mortgage Services
