Brokers, are you ready for a first-time buyer boost?

First-time buyers have taken centre stage in the mortgage market over recent days, as lenders have ramped up their offerings for those eager to get on to the property ladder.

It bodes well for brokers who are positioned to maximise business in this increasingly competitive sector, and comes as a new survey of 4,000 FTBs, presented at The Labour Party conference yesterday, suggested that 80% of those questioned wanted the new government to do more to help them overcome the challenges of homeownership.

At the market heated up, Nationwide was first out of the starting blocks on Monday, allowing loans up to six times income. It also announced that it would reduce mortgage rates for FTBs, making it the first major lender to offer sub-5% rates for those with a 5% deposit. Not to be outdone, Barclays weighed in yesterday with a range of new mortgage products targeting first-time buyers and second movers.

“Lenders continue to drive competition, introducing competitive rates and products that will likely stimulate more activity among first-time buyers, particularly those who have been waiting for the right moment to enter the market,” said Nicholas Mendes (pictured left), head of marketing at broker John Charcol.

“While it may take until next year to fully understand the long-term impact of higher income multiples on property prices, the current landscape is encouraging for brokers. Lender innovation and proactive support for first-time buyers are crucial in driving market activity. As rates improve, we can expect a rise in first-time buyer enquiries as they look to secure favourable deals before property prices show signs of accelerating further.”

What do first-time buyers think about purchasing their own home?

The FTB survey, presented by saving and investing app Moneybox, at Labour’s conference in Liverpool, suggests that the Millennial generation most keenly feel societal pressure to own a home and place the highest importance on achieving this key financial goal, compared to other generations. They are also more likely to worry that they’re missing out, with many delaying key life events to prioritise buying a home.

Felicity Holloway, head of mortgages at Moneybox commented: "Younger generations currently face the toughest conditions in 70 years to buy a home. Having endured a global pandemic, soaring inflation, the resulting cost of living crisis, and ever-increasing rents, many have found their finances stretched like never before in recent years.

"Our recent research finds that 41% of first-time buyers who bought in the last 2 years have struggled to understand the range of mortgage options available to them, while 39% regretted not using a mortgage broker when buying their property. As an industry, we must do more to break down the barriers that are preventing people from finding the information they need and to support them in making financial decisions throughout their homebuying journey with greater confidence.”

She added:  “The industry needs to work together to collectively engage and support people earlier in their homebuying journey. Education and increased transparency around the perceived differences between different broker business models, ie free / fee-paying, will help to ensure that brokers’ services are better understood and are accessible to all”

Some 59% worry they have started saving too late, 30% say they have delayed having a family, and 67% worry they will be paying off their mortgage into retirement. The survey also suggests a gender disparity – in the current economic climate, 44% of women have had to cut back on saving for a deposit, compared to 33% of men, while 32% of women said the stress of home-buying had a negative impact on their mental health, versus 18% of men. FTBs who benefit from financial support, whether a loan or a gift, are able to buy twice as quickly as those who do not have this advantage, the survey finds.

“This disparity suggests that government policies should aim to provide targeted support to help level the playing field for solo buyers and those without family assistance,” said Mendes. “Addressing affordability is key. To mitigate these issues, we would support measures such as expanded access to affordable housing, increased first-time buyer incentives, and policies to address the gender pay gap. The introduction of government-backed savings schemes, further tax relief on deposits, or continued stamp duty relief for FTBs could provide much-needed assistance.”

He continued: “It’s important to recognise the role that lender innovation plays in supporting first-time buyers and shaping the housing market. We’ve seen new entrants like Perenna and April introduce innovative products, which have encouraged other lenders to adapt their criteria. Additionally, several lenders have focused on overcoming deposit barriers. These innovations are helping to make homeownership more accessible in a challenging market. Clearly, there is more to be done.”

Read more: Is a first-time buyer mortgage six times income a stretch too far?

How much support do families give to first-time buyers?

Over the years, Family Building Society had seen an increasing need for family support for FTBs, observed Paul Roberts, its senior account director. It’s also experienced a wider network of relatives supporting borrowers, which is why it recently improved its criteria, widening the scope of those who could support a Joint Borrower Sole Proprietor mortgage, to include aunts, uncles and siblings – and not just parents and grandparents.

“Rates may be starting to come down, but with the cost-of-living still high and tighter affordability making it harder for those with limited deposits, it is still really challenging for first time buyers to get on to the property ladder,” said Roberts (pictured second from left).

Meanwhile, David Hollingworth, associate director of communications at L&C Mortgages recognised that lenders are currently very focused on FTBs. Any new product innovation tends to zone in on this sector, he said - for example, Skipton Building Society’s Track Record and Accord Mortgages’ £5k Deposit Mortgage which seek to give more flexibility on maximum income multiples. Others initiatives, such as Barclays’ Family Springboard, enable family members to help with a property purchase.

“Brokers therefore have a number of solutions to keep on top of but that will help their customers work out what may suit them best,” said Hollingworth  (pictured second from right).

“Demand from first-time buyers remains high and many will be figuring out their strategy to buy sooner rather than later. Less competition from landlords looking to buy may offer them some help in negotiating a price, and falling rates will undoubtedly improve their position.”

Independent mortgage and protection adviser, Joela Jenvey, from Nurture FS, remains positive about the FTB market currently.

“While house prices continue to re-adjust and product rates are reducing and providing affordability is prioritised, it is a great opportunity for FTBs currently to get on the ladder and Nationwide are a great example of a FTB-focused, responsible lender,” said Jenvey (pictured right)

“The importance of enduring customer/adviser relationships is crucial and good mortgage advisers are as important to the community as having a local solicitor, electrician, hairdresser, plumber, or mechanic that you can trust and want to return to time and again.”

Jenvey said she advised FTBs at the start of their home buying journey that, generally, they would grow into their mortgages, as their careers and salaries increased. 

“As long as they, with their brokers, regularly review affordability and tweak the overall term as their income increases, then the overall cost will reduce,” she noted.

Peter Stimson, head of product at MPowered Mortgages, commented: “The current generation of FTBs are under pressure like no other generation. High house prices, driven by a continued and on-going shortage of property means that entry to market is, in many instances, increasingly becoming a lottery determined by the wealth of your parents. Government initiatives, whilst well intentioned, are only scratching the surface of what is a becoming a fundamental societal issue. Without radical change, the risk is, a generation that will be alienated and disenfranchised from the housing market."