Supporting first-time buyers in 2023

It’s evident, and largely inevitable, that activity levels across the mortgage market have fallen in Q4 through a number of economic and pricing factors which are impacting affordability. We are also experiencing a seasonal affect which has largely been missing over the past couple of years in the wake of such strong demand across the purchase market.

Thankfully, we entered this quarter on the back of a period which served to demonstrate the resilience of the housing and mortgage markets and highlight the robust nature of the lending platform we are operating from as we head into 2023. Integral to this lending platform is the role played by building societies in delivering a range of solutions to meet ever-shifting borrowing demands.

As highlighted in Q3 2022 figures from the Building Societies Association (BSA), gross lending figures from building societies was reported to hit £20.2 billion, up 20% on Q3 2021 (£16.9bn) and a rise of 11% on gross lending figures recorded in Q2 2022 (£18.1bn).

During Q3 2022, building societies approved 105,060 mortgage loans, down 4% on the 109,667 approved in Q3 2021 and a fall of 9% on the 114,947 mortgage loans approved in Q2 2022. In addition, building societies were said to hold outstanding mortgage balances of £366.7 billion, up 4% on Q3 2021 (£351.8bn), a steady 23% share of the total mortgage market.

Focusing on what remains a vital component in any healthy market, building societies lent to 26,084 first-time buyers in Q3 2022, 9% down on the 28,667 loans documented in Q3 2021.

Building societies have a long history and commitment to helping a range of first-time buyers onto the property ladder but it’s evident that challenges continue to mount. The average prospective buyer now predicts they will be 37 years old by the time they get their first home. This compares to first-time buyers from 2020 who, on average, secured their first home at age 32. This figure was outlined in research from First Direct which also revealed that 77% of prospective home buyers are concerned about their ability to get on the property ladder, and with inflation at a record high, their prospects are worse than before.

The research also found that most first-time buyers (71%) intend to use their savings, and 35% are planning to use government programmes such as the help to buy/shared ownership scheme. Pooling assets with a partner, close relative, or friend can be an alternative way to secure the cash needed for a mortgage; However, more than half of those who currently own a property did so without the assistance of a partner or sibling.

With Help to Buy ending, there will be an even greater emphasis on alternative government initiatives such as the Mortgage Guarantee and First Homes schemes. Shared ownership and intergenerational products could also prove increasingly attractive for first-time buyers and there is likely to be increased competition at higher LTV bands in a bid to attract more borrowers who may be enticed by some falling house prices.

As these options emerge, it’s important for intermediaries to be aware of which lender can deliver what. And it’s those building societies who possess an innovative, flexible approach and manual underwriting capabilities who will play a key role in delivering solutions for a variety of first-time buyers with differing financial circumstances and support networks.