the housing market but with lending
e struggling to get a foot on the ladder at can be done to help first-time buyers?
The sense of malaise pervading the first-time buyer market won’t lift until lenders relax their criteria. By maintaining the need for hefty deposits lenders are holding back any chance of a long-term recovery. Higher LTV products are beginning to make an appearance but they are far from flooding the market. 90% to 95% products are being offered but not in anything like the volumes needed make a dent in the vast backlog of first- timers desperate to get on the housing ladder. Only 200,000 first-time buyers were able to step onto the ladder last year whereas this number would be closer to 500,000 in typical market conditions. There is a huge reservoir of would-be first- time buyers being pooled by the dam erected by lenders, and each year that reservoir is growing by 300,000. Demand is not going to diminish any time soon either. Over 80% of non-home owning adults aspire to be first-time buyers. Home ownership is engrained in our culture and it is naive to think that the younger generation will be content to rent for the rest of their lives. Renting now costs around 10.5% more than servicing an interest-only mortgage, so first-time buyers are more desperate than ever to escape the confines of the rental market.
The clamour for regulation of banks won’t help the situation. Basel III will impact high-street banking and mortgage lending at a time when we need to be encouraging lenders to loosen the purse strings, not pull back from the market to consolidate their balance sheets.
If lenders continue to be so uncompromising it must be made easier for first-time buyers to piece together a deposit. Savings rates need to be more generous and inflation needs to be controlled to stop it ransacking savings and disposable incomes – the Bank of Mum and Dad can only stretch so far. A healthy first-time buyer market provides the energy necessary for a dynamic and flourishing overall property market, it is time lenders took their responsibility seriously and supported first-time buyers so everyone on the property chain can benefit.
Nicholas Leeming, business
development director, zoopla.
co.uk
Unsurprisingly first-time buyers, or the lack of them, are high up the political and media agenda. But is this segment of the market really suffering more than others? Over the last two years the first-time buyers’ share of new
lending has actually increased, although this is an increased share of a much smaller market. Despite frequent claims in the press that lenders don’t want to lend to first-time buyers, in 2010 over a quarter of mortgages advanced by BSA members were to first-time buyers, so the mutual sector is clearly open for business. So where is the problem? As I said to Grant Shapps at his recent summit, looking at
first-time buyers in isolation isn’t the answer. To understand the barriers in the housing market, we should look at the bigger picture; house price inflation outstripping earnings; new house building not keeping pace with demand; second-time movers unable to make their next move due to low or negative equity; tighter lending criteria; regulatory uncertainty and a challenging funding environment. Vital as first-time buyers are to the housing market, solely
focusing on them will not deliver a healthy level of activity in the market. As well as the challenges on the supply side there are also
demand side considerations. With the full impact of public sector job cuts still to be realised and continued uncertainty in the labour market, some prospective buyers are putting off the decision to purchase, even if mortgage finance is available. While 95% LTV mortgages remain scarce there continues to be
innovation in the market, despite the uncertain regulatory outlook. Lenders, local authorities, housing associations and house builders continue to work together to support first-time buyers. The Chancellor also allocated government funds to its new, although familiar looking, Firstbuy initiative. I believe it is the case that we will see lower levels of mortgage
activity in the near term compared to pre-crisis levels, but the message should be heard that although challenges for all lenders remain the market is nonetheless open for business.
Paul Broadhead, director of
mortgage policy, Building Societies’ Association
sense. Do you want to be a part of the next Bigger Issue? Email
nia@thepublishinggroup.co.uk mortgage introducer MAY 2011 29
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