There may be challenges ahead but innovative leaders are stepping up to combat them

The information in this post is intended for mortgage professionals. Customers should not interpret any part of this as financial advice. If you require advice on a new or existing mortgage you should contact your mortgage broker.

With Spring on the horizon and a return to ‘Plan A’ restrictions in England, there is a hope that we are returning to a sense of normality. Some of the worst economic damage of the pandemic has largely been overcome, with unemployment at 4.1% and UK house sales to first-time buyers at their highest for 19 years.  

However, challenges persist. First-time buyers face a number of hurdles which can make getting on the housing ladder difficult, despite adaptations in the market. The onset of the coronavirus pandemic brought immediate changes to individual circumstances, the housing market and the broader economy, as well as shifting the priorities for many looking to move or buy.

In particular several economic factors have combined to constrict first time buyer’s ability to join the market. Annual house price growth increased to 11.2% in January 2022 according to figures from Nationwide, with the average property price rising to £255,556 in January. Inflation is at record highs and there is evidence that the average age for stepping onto the property ladder has risen to above 30, according to Halifax.

This comes amid tighter deposit requirements during the pandemic. In the first quarter of 2021, the average deposit needed had risen to more than a third of pre-pandemic levels , meaning buyers had to find, on average, another £18,000 from somewhere.  

These pressures mean that many first-time buyers are having to save for longer before they can afford their own home. With the looming tapering of the Help to Buy scheme in 2023, there are structural challenges curtailing first-time buyers’. These factors make it incumbent upon lenders to step up and help redress the imbalance in the market by expanding access to the housing market to first time buyers.

For some, these issues have already bred innovation. Some specialist lenders like Kensington have taken a proactive approach with the launch of its long-term fixed rate mortgage product, the Flexi Fixed for Term. This allows buyers to fix the price of mortgage repayments from anywhere between 11 to 40 years; combatting the uncertainty of future rate rises, an inflationary environment, and providing enhanced affordability.

There are other products which also help address the pressing concern of affordability, such as Kensington’s Hero and Young Professional ranges.

In particular, Kensington presents solutions to some pressing and topical concerns of prospective home buyers. The end of Help to Buy is certainly a blow to many first-time buyers but for those buying a New Build, the customer could still only need a 5% deposit on their property.

Kensington’s mortgages not only address the gaps left by the government but providing forward looking and sustainable mortgages for environmentally conscious customers. Kensington’s green mortgages range proactively rewards customers for making improvements to their property’s energy efficiency with their eKo £1,000 Cashback mortgage. As the climate crisis becomes a permanent fixture in our lives, the value of products like this, which benefit both the planet and consumer, is all the more clear.

Some first-time buyers are taking a different approach to joining the housing ladder, with the rise of shared ownership as an appealing and viable option. Buyers can purchase a share of the property on a leasehold basis and pay rent on the un-owned share. It may be particularly appealing to first time buyers who may struggle to reach the criteria for a mortgage for full ownership.

Beyond difficult economic conditions, there is also the looming challenge of the end of the Help to Buy scheme in 2023. This, combined with the broader market pressures, only emphasises the key role played by brokers Conversations between customers and brokers are key to consumer confidence, gaining an understanding of buyers’ circumstances and introducing them to alternative approaches to home buying, particularly those provided by specialist lenders.  

As restrictions relax and we seem to be heading towards normalisation, it’s important to recognise that, for some, the economic conditions are anything but normal. In light of this, lenders have an obligation to take positive steps to make home ownership a reality for first time buyers, many of whom may feel it’s still out of their reach. Innovative solutions created by mortgage lenders and supportive and informed brokers are essential to ensuring this.