21st January 2015

Won't you please, please, please help me?

Rewind back two years and you would have found very little optimism amongst many would-be first-time buyers that they were about to get a first foot on the property ladder anytime soon. Back then Government schemes such as Help to Buy were still yet to be launched meaning most mortgage lenders’ appetite for high LTV mortgages – the lifeblood of the first-time buyer – was low to say the least. Most first-time buyers were going to need at least 20/25% deposits in order to secure a mortgage – probably with the help of the Bank of Mum and Dad - and therefore we were living through a period of dwindling numbers of first-timers securing their first home. 

Come right up to date though and, while problems still remain for prospective first-timers, there is something of a changed marketplace within which they can function and hopefully have a much more realistic chance of making their property dreams a reality. For a start, back at the start of 2013 we finally had State recognition that the housing market was an absolutely essential component part of UK plc and therefore action was needed to help more people into their own homes and, at the same time, increase the new housing supply in this country.

It has been much maligned over the past two years but I believe history is already showing that both parts of the Help to Buy Scheme – announced in the Budget of 2013 – have reached the parts that other ‘well intentioned’ Government interjections into the property market have simply not been able to. In a very true sense, Help to Buy – and how many Government policies can we say this of – has done exactly what it set out to do. It has increased the number of new homes being built, it has helped many thousands of would-be first-time buyers secure a mortgage with a low deposit, it has also helped second-steppers move up a rung freeing up supply for first-timers and it has reanimated many lenders’ high LTV mortgage interest. 

It has also done this in the face of a barrage of criticism since its inception. Let’s not forget one Vince Cable, Business Secretary of the Government, who appeared to spend most of his time in the intervening months since the launch of Help to Buy attempting to blame the scheme for surging house prices in London and most other areas of the country. Unfortunately, for Vince, the figures tend not to lie with most Help to Buy loans being taken up by first-time buyers outside the Capital and at amounts lower than the UK average. The true fact of the matter is that Help to Buy has done nothing to escalate house prices, in fact, we might argue that without the new housing supply it has generated prices would have risen even further.

So, we come to a point in early 2015 where first-time buyers are far more abundant in number than at any time since the Credit Crunch. Latest figures from Halifax estimate 326,500 people bought their first home or flat in 2014 which would be an increase of 22% on 2013 and the highest number since 2007. It puts this down to a combination of factors not least the Help to Buy scheme, cheaper mortgage rates, and greater supply of mortgages which require smaller deposits. For the first time in a long while, borrowers do not have a dearth of 90% LTV deals to choose from, indeed, there are also 95% products if not in abundance then certainly in much greater number than recent history.  

And let’s be in no doubt that lenders’ re-entry into the high LTV space has almost 100% been driven by Help to Buy. In the days prior to the Scheme, there were some lenders – notably the smaller building societies – who continued to offer low-deposit products however, even with the best will in the world, their lending figures in this area were never going to set the world alight. It needed Government intervention to get some of the biggest lenders in the country to reassess what they were doing in this market and, with the added security provided by the scheme, they have been far more committed to this sector.

At the same time, the bigger banks involvement acted as a catalyst to those self-same building societies that had effectively had the market to themselves. They were not interested in the Scheme but they were certainly interested in retaining their market share, plus we had a number of other players who again were not involved in the Scheme but, for example, took out mortgage insurance in order to increase their high LTV product supply. It has all meant that first-timers are perhaps no longer the mortgage market’s equivalent of Oliver Twist asking for more funding.

So as we motor into 2015, and even with the stricter affordability constraints placed upon borrowers by lenders as part of the Mortgage Market Review, first-timers should be optimistic about the availability of credit and their ability to take part in schemes such as Help to Buy in order to get on the ladder.

The Beatles lyrics are so relevant today, “and now my life has changed in oh so many ways, my independence seems to vanish in the haze. But every now and then I feel so insecure, I know that I just need your help like I've never done before”.

These are certainly not halcyon days for first-time buyers but they represent the best market they have seen for a long time and therefore let’s hope we continue to see an ongoing commitment to supporting the market ‘newbies’ as we move towards, and beyond, the next General Election. 

Help has truly arrived.

Panacea Comment, Mortgages