Paul Holmes, operations director for Firstrung, commented: "The recent outrage on tv, the radio and in the mainstream press regarding high salary multiples is very unfortunate. Hardly any negative sentiment has been voiced as house prices inflated by 100% over the past five years. The general perception is that rising house prices is 'good news' in an apparently 'booming economy'. However, any mortgage product that detours from the norm, in order to assist those priced out due to rising house prices, causes certain sections of the press to trip over each other in their rush to be the first to condemn.
"The sensationalist headlines also illustrate the level of ignorance prevalent in the mainstream media regarding what are, for the most part, thoroughly researched and appropriate mortgage products."
Holmes suggested lenders are damned if they do and damned if they don't: "Amongst the vitriol aimed at lenders this week, no intelligent discussion took place in relation to the mortgage qualification criteria. This would obviously diffuse the sensationalist press angle in a heartbeat.
"These products are very client specific. For example, in order to match the strict under-writing criteria needed to qualify for a mortgage of up to six times income you need to be a high earner, in a profession the lender believes to have a progressive future in terms of salary expectations, and you also need a substantial deposit and an immaculate credit record."
Holmes also questioned who is taking the greater risk: the lenders or borrowers?: "In conversations with leading lenders, it has become apparent that lenders perceive the risk onus to be more weighted towards lenders as opposed to borrowers when designing first-time buyer mortgage products. For example, the Northern Rock 'together mortgage' has proved incredibly popular with our clients, if they qualify they can take advantage of up to 125% lending. In certain circumstances our clients have been able to keep their hard earned deposit (which may have taken up to 5 years to save) and in effect use the lenders' money instead."
Holmes also suggested that having enjoyed the 'boom times' during recent years, lenders can now assume a greater degree of risk due to increased profitability: "It could also be argued that lenders are in fact prepared to manage short term subsidised losses on specific first-time buyer mortgages in the hope of gaining 'spin-off' sales of financial products from a fresh captive audience.
"It's also worth considering just why lenders are still offering preferential terms to first-time buyers at a time when the general consensus is that the market has peaked and certain market commentators are predicting an imminent correction in property values. Are lenders brave, reckless, or operating in an extremely competitive environment where calculated risk may reap future rewards?"
