Lenders can do more to help aspiring homeowners, says exec
With first-time buyers facing a longer wait than ever before to get on to the property ladder, there has never been a greater need for innovative mortgage solutions, according to an industry executive.
The lending market can do more to support aspiring homeowners, suggests Andrew Fisher (pictured), chief growth officer at Aro, an online broker. He urges the industry to move away from ‘outdated mortgage solutions’, both for first-time buyers and existing property owners.
“At an average age of 33, and Londoners waiting even longer until 36, the first-time buyer age is continuing to creep up,” Fisher told Mortgage Introducer. “The process of securing a mortgage is fraught with financial and logistical challenges, especially in today’s competitive property environment. As property prices soar and traditional lending criteria tightens, many prospective homeowners find themselves struggling to navigate the complexities of mortgage approval.”
A combination of higher deposits and strict loan-to-income ratios means many potential buyers find themselves priced out of the market, Fisher observes, noting that rising property prices mean even modest homes are increasingly out of reach for those relying on conventional mortgage products.
“The need for more accessible and affordable mortgage solutions has never been greater,” he said. “The issue of outdated mortgage solutions doesn’t stop at first-time buyers. Mortgage rate shock is a reality for numerous individuals now as they’re seeing their 1% mortgage terms come to an end amid dramatic interest rate rises over the last two years. While news that the Bank of England has cut interest rates - the first time in over four years – does bring relief to many homeowners, there is more that the lending market can do to support them.”
He continued: “Whether it be longer-term, reduced deposits or family mortgages, there is ample opportunity for innovative products to provide greater flexibility and accessibility for first-time buyers.”
It remains vital for borrowers to be properly across the detail of their loans.
“While the allure of flexibility and possible cost savings offered by these new solutions are appealing, they are often accompanied by complexities and risks that require informed decision-making and prudent financial management,” Fisher said.
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What innovations are supporting first-time buyers?
Some progress is already being made, he acknowledges, with affordability challenges prompting financial institutions to innovate, creating new mortgage products tailored to the needs of today’s first-time buyers.
“Some critics argue that longer-term mortgages can extend debt into retirement, which can be challenging,” he said. “Traditionally, the goal in the UK, for many, has been to pay off mortgages before retirement, but this mindset is evolving. With increased life expectancy and changing employment patterns, the lending market must adapt to these changing circumstances.”
Fisher singles out for praise Dutch lender April Mortgages’ new offering, designed for first-time buyers with 5% deposits, providing fixed-rate mortgages of five to 15 years, which decrease as borrowers pay off their loans.
“The opportunity to see the full loan value decrease over time, putting pennies back into the pockets of consumers, is certainly a positive step forward in reducing overall debt for individuals in a sustainable way,” remarked Fisher.
“This enables homeowners to switch to a lower loan-to-value band, and therefore pay a reduced rate of interest, as their loan decreases. Historically, homeowners could only achieve this when they remortgage. This adjustment can significantly boost borrowing capacity, enabling buyers access to properties that would otherwise be unattainable.”
He added: “In a time where many UK consumers are grappling with lengthy and stagnant mortgage loans, the proposed benefits in democratising access to homeownership and enhancing financial flexibility for borrowers are huge.”
While innovative mortgage products undoubtedly play a crucial role in making homeownership more attainable, they alone are not a panacea, believes Fisher. The supply of homes across the UK has to be increased, in line with Labour’s plan to streamline planning processes.
“By embracing innovative mortgage solutions,” he said, “and increased support with government-led initiatives to increase housing supply, the mortgage landscape can work for homeowners.”
