The number of people purchasing their first home has hit the highest level since 2006, according to research from the Yorkshire Building Society. First time buyer purchases accounted for around half of total completions in 2018, and home ownership rates appear now to have at least flatlined following a collapse of more than 10% amongst 25-34 year olds. So, does this mean that home ownership for millions of people priced out of the housing market may once again become a reality?
A number of government initiatives and policy changes appear to have helped, including the introduction of the Help to Buy scheme and abolition of stamp duty for the majority of first time buyers. A separate strand of government policy to diversify the housing market culminated in the 2016 Self Build and Custom Housebuilding Act, known as the ‘Right to Build Act’, which mandates local authorities to provide serviced plots of land for potential self-builders. Later, in the 2018 Autumn Budget the government went further by scrapping stamp duty for most first time buyers of shared ownership properties.
But are these measures anything more than a sticking plaster to delay crucial and much-needed reforms of the UK housing market? The truth is government simply doesn’t have the money, not least the bandwidth or resources, to deal with such a complex issue while Brexit remains unresolved. And even despite these changes many first time buyers will still find themselves unable to even contemplate getting a mortgage.
Of course, government is only one actor with a part to play when it comes to fixing our broken housing market. Mortgage lenders, both large and small, have a responsibility to extend help to creditworthy would-be homeowners who may be struggling to get a mortgage, particularly through schemes such as shared ownership. And while mortgage regulation has been tightened following the Crash a decade ago, some lenders continue to provide ‘deposit-free’ mortgages, as long as parents or relatives can provide security for the applicant. (Indeed, a recent report showed that many will never get themselves on the ladder without the help of the ‘Bank of Mum and Dad’)
As a mortgage lender ourselves, we also bear some of that responsibility.
We’ve provided 95% LTV mortgages for many years, believing that home ownership should be available to as wide a range of people as possible. Even a ‘small’ 5% deposit, which would be around £10,000 on an average* terraced house in England, is a significant amount of cash to save – one that many families across the UK would struggle to do.
We’ve recently launched a range of new 95% LTV mortgages exclusively available to borrowers based in our heartland, furthering our commitment to helping out first time buyers in our local area. And what’s more, the products are available even if the deposit is a gift from family members, though if the mortgage is in excess of 90% loan-to-value we would also require 12 months’ satisfactory rental history from the applicant.
*Based on House Price Index January-November 2018 (England only)