"One would hope that mortgage advisers are fully aware of these offerings and taking them into account when looking at the options available to first-time buyers."
I’m writing this on the 5th July in the aftermath of a very long, six-week General Election campaign, which delivered the result that we might all have been expecting from the very beginning.
The Labour Party has claimed victory with a stonking majority and, when the celebrations finally finish, they are going to have to start dealing with a rather large, nationwide ‘hangover’ that won’t be easily resolved with a can of Coke and an egg and bacon McMuffin. If only it was that simple.
Labour now faces some enormous challenges, not least in our sector, in delivering on its pledge to accelerate home building right across the country.
Foremost among their commitments is the construction of 1.5 million new homes, a target that will undoubtedly define their tenure in power. This ambitious goal is seen as crucial to addressing the pressing housing shortage that has gripped our country for years.
However, in my view, far better to have a target than not, and there’s no denying that this level of new supply is needed desperately if we’re going to be able to meet the existing demand, and that of the country in the future.
First-time buyers – at least from next year – are going to find a slightly less friendly market, at least from a stamp duty perspective, given Labour has said it will not be extending the current stamp duty relief threshold of £425,000 for first-time buyers when it comes to an end. Instead, it will revert back to £300,000, and while I suspect this won’t impact on the vast majority of first-timers, clearly in some areas of the country – particularly London and the South East - that will mean more money is required for stamp duty.
In the mortgage space, what we can say is that we continue to see further growth in the number of high LTV products being offered by lenders, which is a positive when you consider how difficult it remains to save for a deposit, particularly when the cost of so many other necessities – rent, food, travel, etc – has risen so much in the last couple of years.
A 5% deposit is likely to still be a significant savings push for many would-be first-timers but the fact they are now able to see hundreds of product options at this level is again another step forward.
Each month I look at the number of 95% LTV products available to an average first-timer buying an average priced property – this month that is £266,064 according to the Nationwide – with a 5% deposit, which based on those figures would be just over £13,300.
Add in the other costs of purchasing – even with a stamp duty saving – including moving itself, white goods, fees, etc, and you can see why £13,000 is pretty much the start of any potential purchase, rather than the end.
However, once again this month we have seen an uptick in product numbers from 239 95% LTV mortgages to 246, split between 214 fixes and 32 trackers/discounts. I also think we may be missing a number of different options that don’t appear from a new band of longer-term fixed rate product providers, such as April Mortgages and Perenna who might have initially styled themselves as offering mortgages for 20/25/30/40 years, but actually have products for 5/7/10/12/15 years as well.
For some reason, they don’t tend to feature on the Best Buy tables I access via MoneySavingExpert, but one would hope that mortgage advisers are fully aware of these offerings and taking them into account when looking at the options available to first-time buyers.
For instance, on the Best Buy charts, there are a number of 10-year fixes listed for first-time buyers but they do not include April which – as far as I can see from its website for intermediaries – offers a 95% LTV 10-year fix for 5.65%, just behind the top listed mortgage, Yorkshire Building Society’s 5.64%.
I would therefore urge advisers to make themselves aware of what could be on offer from these newer lenders. I appreciate some might have had initial, limited distribution but that would seem to be growing as they have been in the market for a increased amount of time.
Looking at the other options available to first-timers, Lloyds is offer a two-year fix to its current account customers of 5.52%, while Progressive only in Northern Ireland offers 5.55%, and the Newbury offers 5.59%.
For five-year fixes, Progressive’s 4.99% product remains at the top, followed by the Family at 5.09% and Skipton at 5.10%, while in the discount/tracker space, the Loughborough’s three-year discount remains at 5.15%, the Vernon Building Society’s lifetime discount also remains at 5.4%, while the Newbury Building Society offers a three-year discount at 5.44%.
Clearly, there was no Bank Base Rate cut in June which gives rise to a growing expectation that the MPC will act in either August or September. In the last couple of weeks, we’ve already seen some lenders cutting rates, and I suspect the closer we get to the next MPC meeting, more will follow.
Rate-wise I suspect the rest of 2024 is going to look a lot more like it did in the early days of January, and this should hopefully be good news on affordability for those first-timers that may have struggled to get over this obstacle up until now.
After a period of uncertainty, the political die has been cast. We’re going to have a lot more knowledge and certainty in the weeks and months ahead. And that can be no bad thing. Change, and action, really has to begin right now.
