The three As – affordability, accessibility and availability

First-time buyer affordability bounces back in February
Will the Government scheme act as a catalyst for the return of 95% LTV lending?
Upward pressure on house prices shows no sign of easing: RICS

These were obviously all from separate sources but represented a good indication of the major talking points and contrasting market forces which continue to dominate the lending arena.

There is also an interesting symmetry between these stories. It’s always good to hear that affordability levels are rising. The latest MBT Affordability Index found that the average maximum loan available to first-time buyers rose to £237,500 in February, up from a record low of £230,555 in January. However, to maintain some perspective, it still remains nearly 8% down compared to February last year, when the average maximum loan available was £256,915.

According to the data, there was at least one lender able to meet the loan requirements of 86% of first-time buyers in February this year, representing the highest level on record. The same figure was 71% in February 2020 and it slumped to a low last May when there was an affordable option for just 59% of first-time buyers.

This leads nicely onto the article from Patrick Bamford, business development director at AmTrust Mortgage & Credit who offered a very balanced opinion around the new mortgage guarantee scheme. Although one passage did particularly resonate; “I fully expect this Government scheme to act as a catalyst to other lenders – who won’t be involved in the scheme – to also make a return to 95% LTV lending. For example, traditionally, many building societies have been very active in this space and we anticipate that, once product numbers rise and a more competitive market is formed, there will be a greater level of confidence in providing these mortgages to borrowers.”

I can’t help but agree with these sentiments and I expect that many building societies are looking closely at options around the higher LTV bands and evaluating lending boundaries in a responsible manner.

Additional activity at the higher LTV bands is particularly relevant, and welcomed, as - according to the latest RICS residential market survey - the recent upward pressure on house prices "shows no sign of easing". The survey’s headline gauge of price growth registered a net balance of +52% in February, up slightly from +49% in January. As such, RICS says this measure is "indicative of house price inflation maintaining strong momentum", even if the latest reading is a touch softer than the recent high of +66% seen back in October last year.

The three As – affordability, accessibility and availability continue to dominate the lending arena with rising house prices and the ability to raise a significant enough deposit proving to be ongoing concerns for first-time buyers. As a lender, these are areas which we always monitor closely - in line with market trends and ever-changing borrowing requirements. And it's clear that we need to continue evolving and innovating to ensure that the needs of FTBs and second steppers are met to maintain the positive housing market momentum which we have experienced over H2 2020 and Q1 2021.