The lender is stepping up to help them on to the property ladder in a more challenging time
This article was written in association with Skipton Building Society
“I think that it’s a real challenge for first-time buyers at the moment - much more difficult than when I bought my first home 20-odd years ago,” reflected Lucy Lewis, senior national accounts lead at Skipton Building Society. “A recent report from the Building Societies Association stated that becoming a first-time buyer today is possibly the most expensive that it’s been in the last 70 years, and I can well believe that.”
The average age of first-time buyers has increased and longer mortgage terms are becoming much more commonplace, Lewis noted.
“There are two main challenges for first-time buyers today,” she continued. “One being the challenge of raising a deposit and the second being the ability to afford the mortgage - and prove that affordability - to buy that first home, especially as mortgage rates have risen markedly in the last couple of years.”
How challenging is it for first-time buyers to save a deposit?
Lewis pointed to recent research by Skipton Group, showing that almost 80% of potential first-time buyers don’t have enough savings for the deposit needed to get on the property ladder in their area. The so-called Bank of Mum and Dad plays an increasingly important role, it seems.
“It’s not surprising that those that can are often turning to family members to give them a hand,” she said. “Of course, not everyone is in that privileged position. What we are seeing is lenders looking to innovate, to help borrowers to take that first step onto the property ladder.”
For Skipton, that means making a number of changes to its product offering and criteria for first-time buyers. These include its innovative Track Record, which it describes as the UK’s first 100% LTV mortgage exclusively for renters, and Income Booster, also known as Joint Borrower Sole Proprietor, that allows up to three extra people (who don’t need to be family members) to be added onto a mortgage. New build houses and flats are now accepted at 100% on a Track Record mortgage and 95% LTV on its standard range.
“We’ve made a lot of changes to our products and criteria over the last couple of years specifically to help first-time buyers,” Lewis said. “Some of those are very visible, as with Track Record. It felt like a pivotal moment for the mortgage market – a positive message and an innovative product which lit up the media following months of mortgage rate increases and a cost-of-living crisis. But whilst it was a good start, it’s by no means the solution for everyone and there is much more to be done. Other measures are undertaken behind the scenes, for example, positive tweaks to our credit score, but all are undertaken with a view to helping more first-time buyers.
“Lender innovation really is key and anything that we lenders can do to make a difference is widely welcomed by the mortgage broker community. However, there are of course other factors at play. There has been much talk of the housing crisis in the UK and the challenges faced are too complex for lender innovation alone to fix. Action from government is also needed.
“We have a new government who has been vocal about the issues in the housing market and the lack of supply, not only reinstating build targets and promising to get Britain building, but putting planning reform at the centre of its agenda. The changes are not quick fixes so, if successful, the results will likely be backloaded at the end of the five-year term rather than at the start.”
How is Skipton measuring housing affordability?
Skipton Group has established its Homes Affordability Index, that was built in conjunction with Oxford Economics, a leader in global forecasting and quantitative analysis. It brings together data from Skipton Group companies, as well as the Office for National Statistics and the Bank of England.
“It captures the housing challenge currently facing first-time buyers and onward movers in the UK, by looking at not only the cost of buying a home but also the costs of then being able to run that home, combining these into a single metric,” Lewis elaborated.
“The index is a tool that brokers or consumers can access and use so they can look specifically at their region of the country and see what the affordability score is there and how it compares to other areas of the country.”
The index has highlighted some key challenges for first-time buyers. Only one in eight can purchase the average first-time buyer house in their area, based on their own financial situation. Housing affordability has fallen over the course of the cost-of-living crisis, and living affordability is not expected to return to pre-pandemic levels until 2026.
Nearly four in 10 renters spend 45% or more of their income on essential housing costs, compounding their inability to save for a deposit.
Skipton aims to stay true to its values, Lewis said, when it was established as a building society, way back in 1853.
“One of our founding principles is to help people have a home and we still have a very clear strategy, across our business, to try to do just that,” she explained. “A fly on the wall in our Skipton head office would tell you that helping first-time buyers is front and centre of mind - and conversations - for all our teams, and we remain laser focussed on our aim.
“As a building society, we are a mutual, which means that we are owned by our members rather than shareholders. This means there are no dividends to pay - any profit goes back into the building society. In the mortgage market it’s often building societies, rather than big banks, that are seen as the innovators and in my opinion this is definitely the case with Skipton.”
She added: “We’re not afraid to do something different if it’s the right thing to do, and we genuinely do look to help the underserved where we can. We also benefit from the skills, knowledge and data of the wider Skipton Group, which can give us a broader insight in the market.”
Much of Skipton’s mortgage business comes from brokers, and it works closely with and listens to advisers and distributors, to ensure it understands what they are seeing in the market and their businesses, and what first-time buyers need.
“As part of this work, we also run a quarterly ‘Skipton Listens’ session, where we get some brokers and key stakeholders from the Skipton team together to talk about current challenges in different areas of the market,” Lewis noted. “We’ve made a number of changes following these sessions, so the feedback really does make a difference.”
Many of Skipton’s team have personally experienced what it’s like to scale the initial rungs of the property ladder and understand what it’s like to be buying for the first time.
“It is, of course, incredibly important to have a real understanding of being a first-time buyer, how it feels and the challenges faced,” considered Lewis. “Buying your first home, or any home in fact, can be an emotional transaction, led by the heart as well as the head. The feeling of empathy is key as that’s one of the things that keeps you driving change, wanting to make a difference.
“I think that Skipton does that really well and the team really cares. We were genuinely all blown away when the first stories of people that we’d helped using Track Record came through, as these were all people who, without Track Record, would still be renting. It’s wonderful to be part of a team that’s making a tangible difference to the lives of people.”
