Catering for first-time buyers in a challenging market

Soaring energy prices, escalating living costs and increasing interest rates are exacerbating the problems already being faced by FTBs, many of whom have struggled to get a foot on the property ladder in recent years.

One of the main issues facing FTBs has been the difficulties in saving for a deposit while property prices continue to rise and the cost of renting and everyday living remains high. Recent figures from the ONS show that the average property now costs nearly nine times the typical salary in England, and six to five-and-a-half times higher in Wales and Scotland respectively, which only highlights the significance of the problem.

And despite the current market volatility caused by global economic and political challenges, additional data from HM Land Registry's house price index outlined that house prices in July grew 15.5% on an annual basis, up from 7.8% in June 2022. On a non-seasonally adjusted basis, average house prices in the UK were suggested to have increased by 2.0% between June and July 2022, up from a decrease of 4.8% during the same period a year earlier (June and July 2021) and taking the average price of a property in the UK to £292,118.

However, despite the obstacles facing FTBs, the mortgage industry is continually evolving the product offerings available to this demographic and there are a number of specialist options available for FTBs that could help them get onto the property ladder and begin their homeownership dream.

For those borrowers who can afford the mortgage repayments but have struggled to save enough for a deposit and are fortunate enough to have family members willing to assist them financially, options are available to combine earning power and increase borrowing potential.

For example, a mortgage that allows family members to provide a deposit by using their home as collateral or by placing the cash in a deposit guarantee account, can also be used to help get a FTB onto the housing ladder.

These work by holding the cash or charge deposit for a designated number of years, after which time, provided the borrower has not missed any payments, it is returned or refunded to the family member and the financial status of the borrower is reassessed.

For those FTBs who may need a little help with mortgage repayments but have managed to save at least a 15% deposit, joining forces with any family members willing to contribute towards mortgage repayments could also help secure a property.

In this case, the family member has no financial interest or legal entitlement to the property other than helping the FTB make repayments and the property is owned solely by the borrower. There is also the option for a family member to guarantee a deposit via a cash sum or a charge against their home for additional financial support if needed.

Taking that first step onto the property ladder can be an extremely difficult process for FTBs, particularly in the current climate where saving for a deposit while house prices continue to rise and living costs go through the roof can make the prospect of homeownership seem further out of reach.

By constantly evaluating the products available to FTBs and designing solutions that take the need for financial assistance from family members into account, the mortgage industry is not only aiding the evolution of the market, it is helping FTBs overcome these challenges and move one step closer to home ownership.