Are first-time buyers being short-changed by high street lenders?

Young couple moving in to their new home

Director of Sales - Mortgages at Vida Homeloans, Louisa Sedgwick, has written for Mortgage Finance Gazette (May 2018, p. 23) 

There once was a time when first-time buyers (FTBs) with a small deposit, impaired credit or self-employed status only had the high street lenders to choose from. If their applications were rejected, many in these categories had nowhere else to turn and the dream of owning their first property simply disappeared. Times have changed over the last ten years, and we are now looking at a mortgage landscape with a growing FTB specialist sector.

New lenders like Vida are giving those traditionally under-served by the mainstream market a chance to get onto the property ladder. The specialist market is growing and so is the client base, which explains the new products that are appearing regularly in the space based on competitive criteria such as 90% LTV.  Specialist lenders believe that a decline by a high street lender should not be the end of the customer journey, hence why they stay customer-focused by developing new criteria to suit the growing needs of the modern FTB.

The profile of a FTB has changed a lot in the last 10 years. The average age of first-time buyers is increasing, but the way in which they are obtaining funding is changing too. Many more are drawing on the Bank of Mum and Dad, whilst others are wanting to buy their first property however they have an impaired credit rating and may only have been able to save a 10% deposit. We have seen significant variations emerging in this underserved customer segment, and although the marketplace is becoming more diverse and open to this type of customer, some high street lenders often leave them with little hope of buying their first property and time soon.

FTBs now account for almost half of all house purchases financed by a mortgage, and the lending community needs to do more to let borrowers with complex requirements know that they can take advantage of the various choices available to them and should be optimistic about purchasing their first home. On many occasions, high street lenders have told FTBs that they cannot get a mortgage which in turn becomes reality in their minds, the eternal renter This mindset needs to change, and FTBs are starting to reap the rewards of more options becoming available.

To name but a few options:

  • Gifted deposits – family, builder, vendor, landlord
  • Four people buying together
  • Help to Buy
  • Shared Ownership
  • Short employment/self-employment history

In short, the FTB future is bright and innovation is afoot; it’s time to spread the word.