The Intermediary – April 2025 - Flipbook - Page 17
RESIDENTIAL
Opinion
Helping first-timers
face affordability
challenges
T
here is no sugarcoating the fact that
affordability for firsttime buyers is the worst
it has been for almost
70 years.
A report from the Building Society
Association (BSA) last year showed
how first-timers face a double
whammy from the high cost of
buying – thanks to the larger deposits
required – plus a higher cost of
finance, with higher interest rates
pushing up mortgage repayment costs.
Rising property prices over the past 10
years have exacerbated both issues.
Looking across the decades, there
have been periods when higher
interest rates have made the cost of
ownership expensive, but mortgages
were available on high income
multiples with lile or no deposit.
Conversely, in the wake of the
Global Financial Crisis, the reverse
was true: interest rates fell to historic
lows, but lending restrictions resulted
in stricter affordability tests and
larger deposits, making it difficult
for many first-time buyers to access
mortgage funding.
Today’s new purchasers face
challenges on both fronts. However,
at the same time, we must admire
the resilience of the first-time buyer
market in the UK. According to
Finder, there were 341,068 first-time
buyers in the UK in 2024, up 19% on
2023, and this borrower demographic
has certainly been a dominant one for
overall purchases.
Mutual innovation
Part of the reason homeownership
is still not completely out of reach
is the work of building societies like
Hinckley & Rugby, as we continue to
play a crucial role in supporting the
first-time buyer market.
As the sector marks its 250th
anniversary, mutuals continue to
provide innovative lending options,
at a time when the Government has
said it wants to grow the number of
first-timers, but has not resuscitated
schemes like Help to Buy, and closed
the temporary extension to the nil-rate
Stamp Duty threshold for first-time
buyers. Lifetime ISAs (LISAs) are
viable, but these are primarily a
savings tool and do lile to address
affordability issues.
This is where Joint Borrower
Sole Proprietor (JBSP) and tailored
term options come into their own.
These offer practical solutions to
affordability constraints for first-time
buyers, without needing parents to
hand over significant sums of money.
JBSP can boost affordability, by
allowing a relative or family friend
to contribute their income to the
mortgage application. Unlike other
guarantor arrangements, JBSP
enables the additional borrower to
support repayments without taking
legal ownership, ensuring that firsttimers retain full ownership rights of
the property.
For parents, this can be a more
aractive option than giing a
substantial deposit, which can deplete
their own retirement savings. Many
may also be wary about acting as
guarantor by underwriting the equity
in their own home.
Tailored or split terms can also help
to facilitate geing first-time buyers
onto the ladder. Those supporting
such a borrower are likely to be older,
so may not want a standard 25-year
mortgage term extending well into
their retirement. Split terms offer
flexibility by aligning different terms
to each party – older borrowers get the
shorter term they need, while younger
borrowers can opt for longer terms,
LAURA SNEDDON
is head of mortgage sales and
distribution at Hinckley &
Rugby for Intermediaries
further helping with affordability by
reducing monthly repayments.
We have embedded this flexibility
across all aspects of our lending
proposition, ensuring it responds
to the needs of today’s would-be
home buyers. This can be seen in the
more pragmatic and individualised
approach to affordability calculations,
which take into account diverse
income streams – be they earnings
from freelance work, a second job, or
rental and investment income.
These are also adapted to more
modern forms of working and can
even include streaming revenues
from Twitch or YouTube sites, or sales
earnings from businesses on online
platforms, like Etsy, Vinted or eBay.
Broker awareness
Building societies have a long tradition
of supporting homeownership,
offering innovative solutions to
those who might be excluded from
mainstream lending.
We celebrate our own 160th
anniversary this year, and our JBSP
and tailored term options show this
tradition continues to flourish.
For mortgage brokers, familiarity
with these various product options
will allow you to extend your client
base, to meet the obvious continued
demand to buy a first home and
enable you to help more customers
secure a mortgage in today’s
challenging market.
For those looking to support
first-time buyers, building societies
really do remain a trusted partner.
By championing modern lending
solutions, mutuals can ensure
that homeownership continues to
remain within reach for the next
generation. ●
April 2025 | The Intermediary
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