Lenders must be creative to keep helping first-time buyers – Cleary

The index reported that first-time buyer numbers continued their steady growth of recent years and reached 354,400 in the twelve months to October 2019 – more than double the 155,000 recorded a decade ago and just 12% below the 2006 peak.

This strong performance was echoed by UK Finance which found there were more first-time buyers taking their first steps on the housing ladder at the end of the third quarter than there were existing homeowners moving.

So while the rest of the housing market continues to remain in the doldrums, why is the first-time buyer sector so buoyant?

First-timers’ have support

I don’t think it is due to one single reason; there are a number of factors at work.

Employment is running at some of the highest levels since comparable records began in 1971, wage rises are continuing to outstrip inflation and competition among lenders means customers have a wide range of low-cost options available to them.

Then there is the extension of the Help to Buy scheme until 2023, as well as the removal of stamp duty on the first £300,000 for property purchases up to £500,000, both of which are helping first-time buyers.

With so many things in first-time buyers’ favour, what’s stopping even more of them taking advantage of the conditions and how can lenders help even more of them take their first step on the property ladder?

It’s still tough going

Well, house prices remain high in relation to average earnings and raising a large enough deposit is still a big hurdle.

Many are having to rely on help from families as parents paid out £6.3bn to help their children onto the property ladder in 2019, with the average contribution rising to more than £24,000.

Another obstacle, particularly for the self-employed, those with complex incomes or who have some skeletons in their credit history closet, is the reluctance of some high street institutions to lend to them.

So what can lenders do to ensure the growing number of first-time buyers does not grind to a halt?

Be creative in criteria

I’d like to see more lenders broadening their criteria to help those customers who do not fit the high street’s sometimes vanilla approach.

With customers’ needs changing all the time, lenders need to adapt their criteria to accommodate the different employment statuses, irregular income streams and credit profiles of modern-day borrowers.

I’d also like to see more lenders embracing Modern of Methods Construction.

With the government struggling to meet its target of building 300,000 new homes a year by the mid-2020s, it’s essential that lenders consider properties which can be built quickly and efficiently, such as timber-framed buildings, modular buildings and buildings where components are assembled off-site.

While the rest of the market slowly gets back on its feet after all of the recent uncertainty, it’s great to read about the growth in the first-time buyer sector.

It’s up to all of us to ensure this area of the market continues to flourish in the future.