For the first-time buyer mortgage market, the whole is greater than the sum of the parts.
First-time buyers have been the subject of a lot of attention recently – not least because lenders like the Skipton Building Society, who’s recent 100% LTV mortgage has been broadly welcomed by commentators, have shone a light on the problem of affordability for this part of the market. With the Private Rental Sector going through its own evolution, rents rising and supply in many parts reducing, renters are paying more each month than they would if they had a mortgage and would legitimately be better off owning a property rather than renting one.
Of course, any new buyer’s ability to purchase a new property is materially affected in most cases by their ability to raise a deposit. A difficult task if rental payments are soaking up any income you may otherwise have put aside for buying your first home. Even more difficult too when, notwithstanding the rise in interest rates, deposit rates have been slow in too many cases to reflect the rise in rates.
As the saying goes, one swallow does not make a summer. The Skipton mortgage simply provides an additional option for first-time buyers. Deposit Unlock, First Homes, Joint Mortgage Sole Proprietor, Guarantor, Gifted Deposit are all market and government options to help the first-time buyer and new build market. All have their place, but none can be expected to solve the problem of a lack of affordable housing for first-time buyers.
The impending election will throw the light back on housing and only recently the government let it slip that it is considering the return of Help-to-Buy. The news was received by many with far less enthusiasm. ‘Help-to Sell’ some said, but the political expediency of an election will win out. The scheme already has a track record.
Over its 10-year lifetime, Help to Buy supported 325,054 first-time buyers into homeownership, according to the most recent figures from the Department for Levelling Up, Housing and Communities putting the average property value bought with the scheme at £281,321. This is undoubtedly meaningful in volume.
But the scheme also supports house prices, the bell weather of UK economic confidence. No government wants to go into an election with voters feeling substantially poorer. Equally, on a longer-term basis, if our homes are expected to pay for our care in old age, they need to have a value that can be realised. From a policy point of view, let alone economic one, you can see why house price growth is important for governments and voters alike.
Ultimately, affordability is one part of the problem. Supply is the other part. But a considerable step change in the volume of homes available depresses prices – not helpful politically to a government that supports homeownership and needs prices to rally.
This is why innovations from lenders are important and Building Societies can play a central part. We have been running our Rent to Home scheme for some time and, while admittedly targeted at those living in our regional heartland, it has been designed to support First Time Buyers take that first step onto the property ladder, specifically those who can afford to rent but are unable to save a deposit to purchase a home. The successful applicants rent a newly refurbished property located in greater Cambridge for a period of between one and three years. When they’re ready to purchase we return 70% of the rent paid to help with the deposit and provide the mortgage to finalise the move. It’s a very different mechanic to the Skipton proposition but nevertheless is a hugely important step in offering a real pathway to homeownership.
For the moment at least, the whole is greater than the sum of the parts. And Building Societies are providing innovative schemes to help.
Carly Nutkins
Head of Lending
Want to know more? Get in touch with our award winning team on 0345 601 2744, or send us an email at intermediary@cambridgebs.co.uk for more information.
