The recent growth in the number of lenders offering high LTV mortgage products to first-time buyers is one that I’m sure will be warmly welcomed by advisors and their first-time clients, who, before the spring of this year, were watching. an access market.
However, if for the first time stepping up the home ownership ladder was just getting a 5% deposit, I suspect we would see a much larger cohort of new borrowers moving into their new homes each month.
And, as mentioned, it’s not as simple as providing low deposit options for potential borrowers, as securing a mortgage for today’s first-time buyer is often now a matter of finding a lender who can take this into account. a complex combination of variables across the borrower’s credit history, property type, income and deposit, all at the same time.
We will all be well aware that today’s potential borrowers have income and affordability criteria to meet, which are arguably more stringent than for previous generations. responsibly lend their limited available funding.
Self-employed first-time buyers or those with a mixed PAYE and self-employed income often need a specialist eye to understand all of their income paths.
A working and economic environment that has been forged by Covid, the pandemic and various bottlenecks over the past 18 months has created potential problems and obstacles to overcome.
Saving for the deposit is usually the biggest hurdle for newbies to overcome, but they should also consider reading their credit score and credit report. Do they have historic or even more recent credit surges? Have they experienced credit problems due to pandemic induced issues? For a large number of first-time buyers, the problem is simply a very low credit score due to lack of credit history in areas such as non-payment of phone bills or lack of standing order setup. .
The source of the deposit can also be a barrier for first-time buyers, not all lenders accept deposits offered as gifts, and very few accept them from extended family like we do.
So this is not just a case of higher LTV products providing the catalyst for your client to access their first home, and it will clearly be up to the advisor to meet their requirements, get to the bottom of the income and customer credit performance. , and assess the availability for borrowers who have these requirements.
It is likely that deposit requirements will be higher in order to access mortgages for first-time buyers under these circumstances – but there is movement here as well. Foundation recently provided access to 90% LTV mortgages within our specialty residential F1 line for beginners who may be missing out on the mainstream due to a low credit score or credit history. And we have first-time home loans in our F2 range of up to 85% for those with recent credit problems in the past 24 months and up to 80% for those with more recent credit problems.
Sure 10% / 15% / 20% is a bigger deposit to secure, but at the moment these are the maximum LTVs available to first-time buyers who might have a bad credit history and want to always climb the ladder and have the means to do so.
The good news here is that every week lenders like Foundation are giving these borrowers more product choices. Options have grown tremendously and a competitive loan market, with lenders looking at clients much more individually against a set of specialized lending criteria, can only benefit and help many more “newbies” to do so. make their dreams of ownership a reality.
George Gee is Commercial Director at Foundation Home Loans