It’s Not All About The Deposit For First-Time Buyers

Ian Wilson

Head of Halifax Intermediaries

Halifax Intermediaries

High loan to value (LTV) mortgages make the headlines, but lending criteria, speed and reliability are just as important to aspiring homeowners.

The return of 95 per cent mortgages over the course of 2021 has been hugely welcomed, for good reason. Saving the required deposit is an enormous barrier to homeownership, so high LTV mortgages are a necessary and a welcome part of the mortgage market.

The squeeze on 90 per cent mortgages made it harder for some to get on the housing ladder and much more diffi cult for intermediaries to place clients with a modest deposit. The 2021 Mortgage Guarantee Scheme had a positive impact on the availability of high LTV mortgages.

Halifax Intermediaries has a range of 95% LTV options available through the scheme including two and fi ve year fi xed rates, and feefree options. They are important products, but we also recognise that 95 per cent deals aren’t the be all and end all for fi rst-time buyers. And even though high LTV mortgages help many clients, we need to widen the conversation about what fi rst-time buyers need beyond just a low deposit mortgage.

First-time buyer facts

Last year the average fi rst-time buyer deposit rose by £10,000 to over £50,000 and the average LTV was actually 78%. Obviously, this is partly because of the shortage of high LTV deals, but also because many fi rst-time buyers simply have a larger deposit. First-time buyers account for half of purchases so you are likely to come across a lot of aspiring homeowners who do have the necessary deposit to buy.

What do they want from a lender and how can intermediaries ensure they get onto the housing ladder with the most appropriate mortgage and minimal delay?

Aff ordability counts: As you know a 95% LTV is only useful to borrowers who can also aff ord the mortgage. Loan to income (LTI) ratios, stress tests and lending criteria matter hugely when it comes to fi rst-time buyer aff ordability, but they don’t get anything like the same attention as the deposit barrier. It’s one reason fi rsttime buyers need intermediary support more than ever before, so you can ensure they’re eligible for the mortgage before they apply. Reliability: When you submit an application, you need to know that you can trust the lender to deliver what they promise. This means clear criteria, pre-submission support and good service on processing. Your fi rst-time buyer client won’t know which lenders are most reliable, so this is where you can add value. Of course, some clients may have a strong sense of which lenders they trust, such as household names, or be wary about lenders they haven’t heard of.

Better tech: Your clients won’t be concerned about whether the lender has user-friendly and effi cient intermediary technology, but they will want to know if they have a mortgage off er as soon as possible. Online submission systems that are simple to use and reliable not only make your life easier, they mean your client’s application goes in sooner and moves smoothly to off er. And that’s good for both of you.

Great choice: Each borrower has individual needs, circumstances and preferences, which is why intermediaries are so important. Firsttime buyers need to match their mortgage to their circumstances and preferences, whether that means a slightly higher rate for a fee-free deal, or the lowest rate with an upfront fee. Some will want cashback, a long-term fi x, a short-term discount or others will be looking for fl exibility. Service: A high LTV, generous income multiples and fl exible underwriting are all great, but they mean little without the service to back it up. If time is of the essence, a delay to your client’s mortgage could lose them the property. For the many fi rst-time buyers with a decent deposit, strong aff ordability and access to competitive rates, service becomes an important distinguishing feature between products and lenders.

Bigger picture

You know there’s more to fi rst-time buyers than the size of their deposit and they all deserve advice and support tailored to their circumstances and needs.

Understanding lenders’ service, speed and reliability are always crucial pieces of the puzzle, and where intermediaries prove invaluable. But it’s checking the client’s eligibility for the mortgage where you make sure you get it right fi rst time, helping them to secure the mortgage and get onto the property ladder.

Visit www.halifax-intermediaries.co.uk/criteria/mortgage/default. aspx for an overview of our lending criteria.

MARCH 2022