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Improved guarantor products would support first-time buyers

  • 26/02/2016
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Improved guarantor products would support first-time buyers
Guarantor products that do not discriminate on age would help more first-time buyers to get on the ladder, says Mark Dyason, broker and founder of Edinburgh Mortgage Advice.

Dyason explained that the biggest concern among his first-time buyer clients was being able to afford the mortgage when interest rates eventually rise.

He added the main lenders were doing the best they could to support new borrowers, but that a longer-term view on guarantor products would help first-time buyers further.

“The problem is that someone who is old enough to be the guarantor is also often too near retirement, so it means that a 25-year-old first-time buyer can only borrow on a 14 year term. So a lender taking a longer-term view on the guarantor’s age would be helpful, but at the moment most lenders will step away from it.”

Aldermore is one such lender currently offering a 100% loan-to-value family guarantee product where a second charge is taken against the guarantor’s property.

“There is innovation in that space but it would be great to see more competition among lenders along those lines,” Dyason added.

Daniel Bailey, principal at Middleton Finance said the biggest obstacle for new borrowers was saving the necessary cash to put a deposit down on a home.

Indeed, a poll by Mortgage Solutions showed that over half of brokers’ first-time buyer clients are forced to save for well over a year to get together a deposit. Just 8% of brokers said only a quarter of these customers had to save for this long, while 18% said this was the case for over half their first-time buyer clients. For the remaining 18% of advisers, only a handful of their first-time buyer clients had to make major sacrifices and save for at least a year.

Bailey said: “Some of the big sacrifices I have seen are first-time buyers moving back in with parents to allow them to save quicker, brothers and sister or friends buying together to get on the property ladder. If you are renting it is very hard for many to be able to accumulate funds for a deposit.

“First-time buyers cannot get away from the fact that you still need to be able to save for a deposit.”

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