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BLOG: Why first-time buyer numbers are not at pre-crisis levels

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Written by:
03/03/2014
Despite promising signs, many first-time buyers are still being shunned by mortgage lenders, writes Alan Cleary.
BLOG: Why first-time buyer numbers are not at pre-crisis levels

First time buyers have once again been thrown into the spotlight. Not only have we just seen First Time Buyer Fortnight, which seeks to support people taking their first steps on the property ladder, but recent CML data tells us the number of people buying homes for the first time grew even further in December, increasing by 37% year-on-year.

Yet, despite these encouraging figures we think that more needs to be done to ensure that every credible mortgage applicant’s needs are met. Wider improvements in the economy should translate into greater access and an easier process for first time buyers.

Undoubtedly first-time buyers have a vital role in stimulating the housing market and they are likely to be driving a significant amount of the increased activity in the mortgage arena. We are in a position where the economy is slowly but surely recovering according to several economic indicators – unemployment has dropped to its lowest levels since 2009 and consumer confidence is at its highest since 2007.

For first time buyers specifically, the house building industry is resurgent while government initiatives, such as Help to Buy, have also responded to the upturn.

What’s more, we now know the British economy is growing at its fastest rate since the troubled days of 2008, with strong GDP figures expected throughout 2014. With this in mind, those looking to become a home owner for the first time should be in a really good position, arguably the best since the financial crisis to achieve that ambition.

However, while the economy is on the right track, it’s not all plain sailing, especially for those eager to take their first step onto the property ladder.

Despite promising signs, we’ve seen that first time buyer numbers are not at pre-crisis levels. Just one look at the data from January 2013 compared to the summer of 2007 shows a significant disparity.

Making up this gap could be potential buyers who are currently being left un-served by mainstream lenders, as well as those who haven’t yet considered the option of becoming a home owner. That’s why it’s important that there are products and services that cater to all credit worthy first time buyers.

If you’re looking to take the first step on the property ladder you should be encouraged by the general economic recovery. It’s about making sure everyone understands the options available to them and how they can capitalise on these market developments.

Campaigns like the recent First Time Buyer Fortnight are a great way of raising awareness of the whole house buying process for those looking to buy for the first time, especially those who might have been uncertain or burned in the past.

Equally, it is an opportunity to inform and educate these potential buyers on the range of options available to them – signposting what to do and where to go when encountering challenges and issues.

Help to Buy may be bringing relief by lowering deposit expectations but this scheme doesn’t support people who are challenged by other circumstances, such as employment status, lack of a credit history or those with credit blemishes from the past.

As the criteria of big lenders can be tight and inflexible, consumers might find that although they are a viable and credible mortgage applicant, they are refused and left unsure of where to turn next. Plus, there are concerns that the situation may worsen with the implementation of the mortgage market review (MMR) when increasingly stringent requirements that lenders adopt could see the decline rate rise.

It’s because of these consumer concerns that the industry approach to lending has to be more open to help people, and while of course maintaining stringent checks and robust criteria is important, applications should be dealt with on a case by case basis.

Now is a really great opportunity for people to look at the specialist products that can support their move on to the housing ladder if they have been turned down in the past.

So if you’re a prospective buyer who has been burned in the past broaden the products you are looking at and seek advice. There are a range of options available that can help demystify the process to ensure you know what to do and where to go when mainstream lenders can’t meet your needs. As we push forward into economic recovery, the mortgage market should continue to encourage you as a first time buyer to make that all important first step, for you and the wider economy.

Alan Cleary is managing director of Precise Mortgages

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