Last week Mortgage Solutions polled brokers on the question of competition, with almost two-thirds (65%) reporting that competition levels had led to the creation of better deals for those buying their first home.
Rachel Lummis, mortgage adviser at Xpress Mortgages, said that the level of competition among lenders for first-time buyer business has seen rates on offer at 90% LTV that aren’t that far off the deals available to buyers with much larger deposits.
She added that a significant number of these deals come with a range of incentives, such as no arrangement fee or cashback, which makes them even more attractive to those taking their first step onto the housing ladder.
Daniel White, managing director of White Financial Services, agreed that it is on the incentive side where lenders can attract first-time buyer business, but warned that some lenders are undermining their incentives with large fees elsewhere.
He continued: “We’ve just seen Halifax introduce cashback of £1,000 which is fantastic but unfortunately, this is cancelled out by the arrangement fee charged at £999. If lenders can introduce free mortgage valuations, cashback offers and no arrangement fees to first-time buyers then the savings really do add up.”
Borrowing for longer
However, Lummis argued lenders need to be more flexible over lengthy mortgage terms.
She explained: “As property is more expensive now, particularly in London and the south, many clients want to go for a 30 or 35 year term, and some even want 40 years just so that they can get started with home ownership. While some lenders go up to 40 years, it would be helpful if more did in order to give the customer more choice.”
Improving the application experience
White added that there is more to meeting the needs of first-time buyers than simply launching decent rates, arguing that it’s vital that lenders are also able to process applications “in an acceptable and timely manner”.
He said: “If there is minimal difference in cost but a huge difference in service, then service will win the majority of the time and that’s what lenders really need to be sharp on.”
Changing the sales process
David Sheppard, managing director of Perception Finance, said that lenders are clearly trying to be more innovative with how they serve first-time buyers, noting recent launches from Barclays, Family Building Society and the Post Office.
He added that the government’s move to drop stamp duty for first-time buyers in the Budget was welcome, but argued further changes are needed in the way homes are marketed and sold.
Sheppard said: “A lot of transactions can fail due to gazumping or issues coming up in the survey or legal work that cost time and importantly money and if the cash situation is limited already, it is not going to be helped by losing more on the costs of a property that falls through.”