First-time buyers still driving market

It’s an obvious point to make but it also remains true that while there are still significant barriers to entry for would-be first-time buyers, the desire to get on the housing ladder remains unabated, resulting in this borrower cohort remaining the pre-eminent one in terms of purchase activity.

Clearly, over recent months, that has firmed up even further, with many new purchasers seeking to complete their house purchases before the shift back to the previous Stamp Duty thresholds from the start of April.

As I write this, at the start of February, that door is of course closing.

Anyone who wants to complete before the end of March is going to have to go some in order to make that purchase happen, and to benefit from the higher thresholds, which will save them some money.

For some who now feel this can’t be done, there may be the urge to put their plans completely on hold, however I don’t get the sense that the vast majority will feel this way, and it’s my belief that we should all be focused on the advice opportunities presented by first-time buyers, because to my mind, they remain plentiful.

The reasons for this are fairly obvious.

The most recent statistics out of the ONS for January show that UK private rents increased by 9% over the last 12 months.

And while this is down slightly from the 9.1% increase in November, it shows the continued upward direction of travel for rents.

At the same time, house prices – while they have barely moved in the last couple of years – are showing signs of increasing again.

4% annual increases, could move to 6% or 7% this year, and if this is the case, would-be purchasers might feel the need to act before the pricing moves further away from them.

Similarly, we are hearing that access to mortgage funding could be moving further in the direction of first-timers.

The Government’s all-encompassing quest for economic growth has led it to the Financial Conduct Authority’s (FCA’s) current rules on mortgage stress testing and lenders’ 15% cap on lending to borrowers at above 4.5 times loan-to-income (LTI).

It has asked the regulator to review these potential hindrances to lenders being more active in a mortgage space highly populated by first-time buyers, which may well see a much more competitive and healthy market for loans for this demographic.

Plus, we should not discount lenders ability to build greater levels of margin on these products and also their ability to build strong relationships with customers who are at the very start of, what could be, a 30 to 35-year homeowning (and mortgage interest-paying) journey.

Certainly, a falling Base Rate is also likely to act as a significant catalyst in this space.

For those very reasons, one suspects that most lenders will welcome the regulatory shackles being taken off them, allowing their own credit committees to determine the level of lending they are comfortable with offering at these higher LTI levels, rather than a – albeit much-needed at the time – post-Credit Crunch regulatory dictat that might no longer be required.

It certainly feels like the Government wants the regulator, and ergo lenders, to be much more in tune with the needs of today’s first-time buyer.

We must also mention the ongoing commitment to building 1.5 million new homes over this Parliament – it will need buyers to have ready access to finance in order to buy these properties, regardless of how many it does actually build.

What we have to believe is that a combination of all these forces will act as a catalyst for a greater number of would-be first-time buyers to not just consider their purchase options, but to be able to act upon them.

Plus, of course – and this will be vitally important for advisers – we might well see a growing cohort of clients who had previously been unable to square the circle in terms of accessing mortgage lending, who find in this brave new world, that they can now do so.

That is important because as advisers you’ve already had contact with these individuals. They should be sitting on your database.

You should have remained in contact with them, and perhaps can now offer them the product recommendation and mortgage offer that was missing last time they came to you for advice.

My belief is that, despite us being very close to that Stamp Duty shift, the number of those seeking to purchase a first home will not move significantly downwards over the medium-term.

Indeed, the environment looks like it’s moving even further in their favour so make sure you are marketing your services to those you have seen before, and those who will undoubtedly need your advice in the months ahead.