Helping first-time buyers a strategic objective for Skipton Building Society

This article was created in partnership with Skipton Building Society

Skipton Building Society’s purpose is simple: helping people into homeownership. And, especially in the current economic climate, that includes a strategic objective to help first-time buyers.

From declining homeownership levels and a dwindling supply of property — the Home Builders Federation estimates the UK needs a record-breaking 320,000 houses per year to provide enough homes for the population, while also reporting a sharp reduction of planning permission being granted by local authorities — to the end of the Help to Buy equity loan scheme and the revolving door of housing ministers, “there’s no doubt the market has its challenges, especially for those trying to get on the property ladder for the first time,” said Jonathan Evans (pictured), national accounts and new build lead at Skipton.

“I’d also throw in the macroeconomic conditions,” he continued. “The unemployment market is tight, the GDP stagnated and we’re in a technical recession as we speak, and there’s a lot of chat about when the Bank of England will make the first rate cut which will drive the direction of interest rates.”

However, there is some positive movement as 2024 kicks off, such as inflation beginning to come down, which is improving customer confidence and sentiment. Connells Group, a subsidiary of Skipton, recently released its Quarter Four Market Report for 2023 which reported a 24% uplift in new home sales in Q4 of 2023 versus Q4 2022, and an increase of 17% in new homes for sale over the same period. With all signs pointing to things moving in the right direction, Skipton is focused on continuing to build that momentum over the coming year, Evans noted.

“Skipton is driven to do more, especially for first-time buyers,” he said. “We’re really active with our mission to get people into homes of their own.”

Identifying significant challenges

The two key challenges first-time home buyers face are affordability constraints and deposit constraints. Since 1997, earnings in the UK have doubled but house prices have increased 4.5X in value. This is a significant barrier, especially for people who don’t already own and aren’t benefitting off the equity gains of their home, not to mention that mortgage rates are much higher than a few years ago.

Lender stress rates are also higher now, and even if you manage to buy the house, you still have to run the property by paying utilities and council tax, for example. On the deposit side, house price inflation is not only increasing the loan amount customers must take on, but also the deposit amount that the customer has to put down.

“Earnings are simply not keeping up and house price inflation is a real issue,” Evans said. “Couple that with the cost-of-living crisis, and it’s an even larger issue. It’s difficult to save anything, especially when someone is just starting out. Consumer budgets are under scrutiny at the moment.”

How can mortgage brokers help?

With 86% of mortgages in the UK intermediated — and looking only at first-time buyers, that number is even higher — mortgage brokers play an important role in the homeownership journey.

“As a trusted advisor, they should hold the customer’s hand every step along the way: they came to a mortgage professional for a reason,” Evans said, adding that one of their key value-adds in the current environment is the ability to educate customers on what to expect in a volatile market. And that doesn’t mean only for the here and now.

“Try to set the scene for two years, five years down the line when they’re likely to be maturing from the product they’ve been recommended. What, potentially, could the landscape look like? Help prepare them for the future to come — have that conversation.”

Specifically for new builds, brokers should keep in mind that there can be timing delays causing the mortgage offer and completion date to not align, and it’s important to manage customer expectations around that. These customers also need to know what to expect when they’re getting a new build handover, including pointing them in the direction of a professional snagging company, and should take into account considerations like service charges for the upkeep of the estate, which again can tie back to budgeting considerations and affordability concerns.

While there are a number of government options available to help — such as shared ownership and rent to buy — builders are starting to get innovative by looking at private shared equity and private shared ownership schemes. If you’re a mortgage advisor, “make sure you’re up to speed with everything that’s happening in the new build sector as well as all the schemes available to support first-time buyers,” Evans advised.

Brokers often have fantastic relationships that enable them to take the customer on a full-circle journey, and they should lean on that circle of experts. From dealing with builders, developers, housing associations, and a solicitor to complete the deal, it’s the connection with the lender and a strong BDM team that can really make a difference.

“At lenders like Skipton, where we’ve got a degree of flexibility with the underwriters, our BDMs can bridge the gap between the broker, the lender, and the underwriter,” Evans said.

What Skipton brings to the table

In a market where there’s generally a lack of lenders, specifically in the new build sector, willing to go to higher LTVs to help customers with smaller deposits, Skipton stands out: it offers a 95% loan to value on new build houses and flats, and doesn’t use any third-party schemes. Instead, it does it “off our own backs,” Evans said. Not many lenders are out there doing that, he noted.

Skipton also offers the first home and shared ownership schemes, as well as the track record product that’s designed to help resentful renters get on to the property ladder. For the latter proposition, if the customer demonstrated 12 months of rent payments Skipton can go up to 100% LTV without any deposit at all. This was a popular option that helped many renters into ownership last year, Evans noted.

On the affordability side, Skipton offers up to 40-year mortgage terms on standard offers and also income booster, also known as joint borrower sole proprietor, where up to four people with no restriction on relationship can add their incomes to the application. Focusing in on new builds, the lender has a nine-month offer with a three-month extension so that if the customer is facing a pushed completion date, there’s up to a year flexibility where the same terms are honoured — or jump to a new product with no additional fees if rates go down during that time period. Again, in a market where most lenders offer six months’ offers, Skipton stands out.

“It gives the broker, the customer and the builder that extra time without having to worry about reapplying and starting the whole process again,” Evans said.

According to Skipton’s research, on average first-time buyers are aged 35 in London and roughly 33 years of age in the rest of the UK; and accounted for 28% of purchases in 2023. Despite the challenges they face, Evans said it’s clear this is a resilient group, and one Skipton is keen to continue to champion.

“Overall, although it’s been a tough few years economically and we’re not out of the woods yet, it feels like we’re starting to turn the corner,” he added. “At Skipton, we cater to first-time home buyers. We’re doubling down on our commitment to innovation and strategy to help this demographic as much as possible in the coming years.

These views are Jonathan’s own.