The Bigger Issue


First-time buyers are the life-blood of t


criteria still prohibitively tight, they are Each month Mortgage Introducer takes a look at the bigger issues. This month: Wha


First-time buyers are often labelled as the lifeblood of the market, which is clearly a deserved title. It’s no surprise then that the challenges they face are so often under the spotlight. Criteria changes since 2008 are often accused of hampering chances to get onto the ladder. But at Lloyds, we still approve eight in 10 first-time buyer applications. Admittedly, the lending policy for first timers may not always be a walk in the park, and rightly so. But it is responsible and appropriate for today’s market. Remember, it’s not just today’s first-time buyers who are having a tough time - you’d be hard pushed to find a generation that ever found it easy to buy their first home.


One thing that our positive approval rate may signal, when compared to the concerns of first-time buyers, is a lack of demand or reticence to apply. This is where intermediaries can play an important role. Navigating the mortgage market for the first time is a tricky task, and the more intermediaries – as market experts - can do to support and educate borrowers about their options, the better it will be for the market. With these points addressed, lenders must focus on the


products they provide. More innovation in this area is the calling card of housing minister, Grant Shapps, and it should be. Products in this area must genuinely address problems faced by first-time buyers. Building up a deposit is regularly quoted as the biggest


hurdle for this group. The Lloyds TSB Lend a Hand product makes it easier by requiring just 5% from the borrower. Although in its infancy, its local authority sister initiative provides a similar solution for those that can’t rely on the Bank of Mum and Dad. In addition, Halifax’s fee free deals to minimise set up costs can make a difference. Even with these solutions, it’s important to remember that we’ll never solve the problems of first-time buyers by only looking at first-time buyers. These challenges are magnified at the bottom of the ladder, but exist all the way through. That’s why getting it right for first-time buyers is


Mike Jones mortgage sales director,


Lloyds Banking Group


so important for the long term health of the market.


First-time buyers have had a tough time in recent years. Whilst rocketing house price inflation has calmed, the lack of mortgage availability strikes a severe contrast with the cheap, high loan to value deals of 2007. Although fragile confidence in the housing market has


certainly dampened appetite, the need for a big deposit and tougher criteria has become the major problem. That has led to a number of attempts to provide innovative solutions to the lack of high LTV products. The majority of these options hinge on help from parents with


some such as Lloyds, National Counties and Bath looking to extend the lending available to the first-time buyer by taking additional security in the form of parental cash or equity. Whilst some lenders have pulled away from guarantor


lending, others like The Mortgage Works have developed products targeting the continued need for this type of deal. Shared equity continues to form the backbone of


Government and developer schemes with Firstbuy the latest incarnation. Developers have also fought for first-time buyer business using indemnity insurance to help lenders extend their LTV. None of these will change the market in their own right but cumulatively bring new alternatives.


It is hard to see the focus


on parental help going away and any new offering is likely to call on the Bank of Mum and Dad. For example we might see use of some kind of family offset feature. Real change is still only likely to come from more products


available at higher LTV and this is gradually improving. More providers are offering 90% loans and Skipton has put its head above the parapet to launch back into 95%. It is good to see the number of participating lenders grow but it will take time for things to markedly improve. In the meantime it looks likely that lenders will look to create


products that offer higher LTV without taking all the risk. However, one positive move would be to open up more of these deals to the broker community enabling confused borrowers to be advised and assisted right through the maze.


David Hollingworth, communications director,


London & Country Our experts have had their say, now it’s your turn to have yours. Visit www.mortgageintroducer.com and vote for the expert you think makes most 28 mortgage introducer MAY 2011


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