On the side of first time buyers

The average two-year fixed rate was 5.48% at the start of January, said Moneyfacts, and the latest house-price-to-income ratio is 8.6, according to the Office for National Statistics, based on the average annual disposable household income of £35,000 and house price of £298,000.

The end of the current Stamp Duty holiday is set to make buying a first home even more expensive for many from April, as the threshold falls from £425,000 to £300,000.

Whether they are struggling to save a sufficient deposit, restricted by maximum loan-to-income ratios, have specialist circumstances that prevent them from getting a mortgage on the high street, or all three, first-time buyers face a challenge.

But it’s not all bad news.

Focus on supply

Lenders, homebuilders and the government are working hard to broaden access to finance and homeownership, with ambitious homebuilding targets alongside a range of demand-side initiatives, including homeownership schemes and innovative mortgages.

All of these measures could give first-time buyers more options, but it’s brokers on the frontline who make the difference between them getting into a home of their own or spending longer trying to save.

This isn’t just hyperbole – brokers account for 87% of mortgage business, according to the Intermediary Mortgage Lenders Association, so you are key to supporting this important sector. And we are here to help you do it.

How Aldermore helps first-time buyers

Aldermore specialises in supporting first-time buyers, including those who might struggle to find a mainstream mortgage. We always make sure to recommend that first time buyers should speak to a broker to get the most help they can.

Some don’t have a big enough deposit, or the numbers don’t add up on their income. Others are self-employed without the necessary two years' accounts required by the big banks, while some have experienced a credit blip. Or it might even be a combination of these issues. Perhaps they are interested in using the shared ownership scheme to help them onto the housing ladder, but are hindered by tight lending criteria.

By designing specialist lending products and taking a flexible approach to underwriting, we can often look beyond the numbers to hear your client’s story and find a way to support them, even if they’ve already faced rejection elsewhere.

Below are some of the ways we support first-time buyers:

• 95% LTV lending: In January we relaunched our 95% LTV mortgage range to first-time buyers on our level one lending products. Not every lender offers this and importantly, of those that do, many apply extremely tight lending criteria while we can be more flexible.

• High loan-to-income ratios: Even if your client can raise the deposit, many find their income doesn’t stretch far enough based on the lender’s maximum income multiples. At Aldermore, we will consider lending up to 5.5 times income to first-time buyers with a total income of £60,000 or more, even up to 95% LTV.

• Flexible lending criteria: Whether your first-time buyer client is self-employed and struggling to get a mainstream mortgage or has experienced a financial problem that precludes them from a high street homeloan, Aldermore takes a more flexible approach. Our specialist underwriters have a deep understanding of the nuances of self-employed accounting, plus we don’t believe that a financial slip-up should preclude your client from access to a mortgage.

What can brokers do?

You already know how to manage the expectations of those first-time buyers with housing dreams bigger than their borrowing power, while maximising what they can sensibly achieve.

But remember that high LTV lending can be changeable, so you need to stay up to date with which lenders currently offer 95% LTV loans and the lending criteria they apply.

Do the same with guarantor-style mortgages, because some of your clients will potentially have parental support from the bank of mum and dad, even if they can’t gift a deposit.

It’s also worth asking if they’ve considered government homeownership schemes, especially if you know of any local developments with such schemes on offer.

Most importantly, help your first-time buyer clients get mortgage ready, by checking their finances now to see how they can better position themselves to get an offer first time.

Doing this prep work not only helps them, it makes it easier for you to see the full financial picture, source the right product and boost your conversion rate, because there’ll be no nasty surprises down the line.

Attracting and helping more first-time buyer clients is good for them and great for your business. It allows you to gain (hopefully) long-term clients, get invaluable referrals and position yourself as a local expert in the products available to this group.